Sunday, December 8, 2013

Americans gotta consume...No, really, Americans GOTTA consume. See here how much...

Retail and Food sales are a nice indicator of the health of the economy.  It shows the level of spending primarily by consumers with money they earned, saved, borrowed, or received from other private or public transfers.

Below is a long term graph of expenditures in this category---the BLUE line. The blue line includes the sale of gasoline. The creator of the graph (Calculated Risk) factors out spending on gasoline, a single good, to show how everything sold in the retail sector is faring in sales---the RED line.  So, the red line is all other retail and food spending that goes on in the economy sans the dollar value of gasoline.

With apologies to a real economist at Calculated Risk, I used his graph and marked it up to illustrate an interesting point, in my opinion.

I inserted a straight dotted line along the expanse of the BLUE total retail and food sales line. Just connected the current data point with the point at the start, January 1992.  Amazing...a straight line that for 21 years hugs the sales trend and only deviates from what we know now are traumatic economic events.

There is a small divergence above the trend line in 2000-01, a larger one in magnitude starting in 2005 then the "crash" where the bottom fell out and sales were way below the trend line in 2008.  BUT we are now back along the trend line!  Good news, right??

Remember, the blue line includes gasoline sales.  Now look at the long term trend without gasoline sales. That will be the RED Line.  Again, the dotted line I inserted is the SAME one as before but shifted down exactly parallel.

Notice how it hugs the red retail/food sales ex. gasoline (Red Line) very tightly up to 2008. The bottom falls out BUT there is a persistent gap between sales and the trend line.

In this last graph I estimate there is roughly a $30 billion dollar deficit between current spending and the established longer term trend. This $30B IN ADDITION to spending on gasoline!

Where is that spending going to come from?  Gotta create some jobs so people can go to the mall, buy some stuff and grab some lunch.  Just like the old days...before the recession...
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