Consumption Spending HAS Already Recovered

[I AM NOT THAT GUY 5,715]

One More Time: Consumption Spending HAS Already Recovered

Commentators and pundits, some of whom ought to know better, continue to harp on the idea that the recession persists because consumers are not spending. Every Keynesian seems to believe that because consumers are in a dreadful funk, only government stimulus spending can rescue the moribund economy, given (to them, at least) that investors will not spend more because the Fed, having already driven interest rates to extraordinarily low levels, cannot use conventional policies to drive them any lower and thereby elicit more investment spending.

People, please look at the data. They are conveniently available to one and all at the website maintained by the Commerce Department’s Bureau of Economic Analysis, the outfit that generates the national income and product accounts for the United States.

According to these data, real personal consumption expenditure recovered from its recession decline by the fourth quarter of 2010. Continuing to grow, it now stands (as of the most recent data, for the second quarter of 2011) even farther above its pre-recession peak.

Real government expenditure for consumption and investment (this concept does not include the government’s transfer spending, such as unemployment insurance benefits and social security benefits) is also running higher than its pre-recession level. In the second quarter of 2011, it was running more than 2 percent higher (recall that this is “real,” or inflation-adjusted spending; nominal spending has grown substantially more).

The economy remains moribund not because consumption spending has failed to recover and not because government spending has failed to increase, but because the true driver of economic growth—private investment—remains deeply depressed. Gross private domestic fixed investment fell steeply after the second quarter of 2007, and in the second quarter of 2011 it remained 19 percent below its pre-recession peak. This figure fails to show how bad the investment situation really is, however, because the bulk of the investment spending now taking place is for what the accountants call the “capital consumption allowance,” the amount estimated as necessary to compensate for the wear and tear and obsolescence of the existing capital stock.

The key variable is net private domestic fixed investment—the investment that builds the productive private capital stock. Quarterly data through this year are not currently available at the BEA website, but the annual data show that an index of its real amount peaked in 2006, fell substantially in each of the following three years, and recovered only slightly in 2010, when the index showed net private domestic fixed investment was running about 78 percent below its level in 2005 and 2006. Here is the true reason for the recession’s persistence.

Private investors, despite the full recovery of real consumer spending and the increase of real government spending for final goods and services, remain apprehensive about the future of new investments, especially new long-term investments. I have argued repeatedly during the past three years that an important reason for this apprehension and the consequent reluctance to make new capital commitments is regime uncertainty—in this case, a widespread, serious fear that the government’s major policies in areas such as taxation, Obamacare, financial reform, environmental regulation, and other areas will have the effect of depriving investors of control over their capital or diminishing their ability to appropriate the income that the capital generates. President Obama’s harping on the desirability of making “the rich” pay their “fair share” (that is, more) of the government’s ever-rising costs only exacerbates regime uncertainty. Business leaders have spoken again and again of how the present political environment is discouraging risk-taking and entrepreneurship.

In any event, it should be crystal clear that the problem is not the failure of consumer spending to recover. Let us please have more respect for the facts than to continue singing that old, thoroughly worn-out tune.

http://biggovernment.com/rhiggs/2011/10/02/one-more-time-consumption-spending-has-already-recovered/#more-341684

[luckytxn 2,264]

I will say from what I have seen for the last few years is that we are very busy with the basic grocery and discretionary spending in transportation hauling. And pretty much one third of all hauls is paper or paper products as before the melt down. Even the products we used to move for the auto industry is getting better but maybe half of what it was. The only thing I have seen that is still depressed is maybe the products for the housing industry. The products that were getting to be a major portion of all loads hauled in this country from wood to build the houses to the cabinets that are used to finish the houses to the do it your self's products are very flat and still in crash mode. Personally to me it is that we are back to sanity in that quarter. It was getting insane and I could never see it lasting but it seemed to. I started driving 15 years ago and it was the up and coming market and eventually started to become the top 3 products that we hauled on the road at any given time. That collapse hurt a lot but everyone had to expect it. Building after all is and always has been the most cyclical of things. Lucky for me and for employment is that people have to eat.

[I AM NOT THAT GUY 5,715]

I will say from what I have seen for the last few years is that we are very busy with the basic grocery and discretionary spending in transportation hauling. And pretty much one third of all hauls is paper or paper products as before the melt down. Even the products we used to move for the auto industry is getting better but maybe half of what it was. The only thing I have seen that is still depressed is maybe the products for the housing industry. The products that were getting to be a major portion of all loads hauled in this country from wood to build the houses to the cabinets that are used to finish the houses to the do it your self's products are very flat and still in crash mode. Personally to me it is that we are back to sanity in that quarter. It was getting insane and I could never see it lasting but it seemed to. I started driving 15 years ago and it was the up and coming market and eventually started to become the top 3 products that we hauled on the road at any given time. That collapse hurt a lot but everyone had to expect it. Building after all is and always has been the most cyclical of things. Lucky for me and for employment is that people have to eat.

That would make sense, since speculation has all but been removed from the housing market. I know four years ago when I needed a reroof, you had to wait months to get a roofing contractor. A few years before that, you could get a roof for half the price, and roofers were falling over themselves to get the work. These days, the contractors have laid off most of their employees, and are doing most of the work themselves.

We might as well get used to it. Six decades of unreasonable expectations has taken its toll. I blame old people.

Edited October 2, 2011 by Crusty Old Perv

[MyLittlePony 340]

Food and gas will never go down just stick with everyday living expense and barely have money to buy extras for self.

[kytwell 179]

Six decades of unreasonable expectations has taken its toll. I blame old people.

[Bad_Daddy 2,209]

Does this mean more iphones for everyone?