3 REASONS FOR A SLOW RECOVERY
25 November 2009 by TPC
1 Comment
David Rosenberg points out the three simple reasons why the U.S. consumer based economy is unlikely to rebound sharply:
The three most significant headwinds for the consumer this year are:
1. Jobs. Nonfarm payrolls are 5.5 million, or 4.0%, lower now than it was a year ago.
2. Credit availability. Outstanding consumer credit has shrunk $123 billion in the past year (or -4.8%).
3. Gasoline prices. At $2.64 a gallon nationwide, are 75 cents higher than they were a year ago. This is equivalent to a cash flow drain to the tune of $100 billion dollars for the household sector or the equivalent of a 1% pay cut.
Source: Gluskin Sheff
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Rosie is right on the money as usual. The only thing holding this rally up is our money being thrown away by the Fed.The facts that he states are available here, at Calculated Risk and Mish. Basic simple math says that on no. 1 we drop 3% on GDP. On no. 2 we drop another 3%, and on no. 3 we will drop 1%. We all know that GDP has to be lower than they are quoting. Both rail and trucking being down about 17% yoy just a coule of months ago. Everything going into GDP gets moved ( or a major chunk of it anyway) by one or the other. What they can’t lie about is that sales tax receipts are down 8.2% yoy. That kind of gives you a close approximation as to where our actual GDP really is. We are going to walk right off the cliff again some time in the next six months. That will happen when the smarter ones decide to lock in their profits rather than stay with the herd and lose their a–. Once that little exodus starts it will be 2008 all over again. Only this time the government has already used up all of their ammmo, and we are going down for keeps ( meaning a long time).