The latest reports on global consumer spending are consistent with recent data that Q4 could prove to be the worst we’ll see in this economic downturn. The data, however, does not show signs of sustainability. Global stimulus, tax cuts and auto incentives have given a sharp boost to consumer spending in the latest quarter. This has resulted in what currently looks like stabilization in consumer spending. In a country where there has been little to no auto sales incentives U.S. auto sales were down 5.1% vs March while China’s stimulus program helped boost auto sales 13.9%. Japan also experienced a 10% monthly acceleration in sales due to sharp sales tax cuts. These figures are certainly encouraging in the near-term, however, the long-term sustainability is very much in doubt. As effective as these stimulus plans have been in the near-term there is very little evidence that their stimulative effects will be anything more than a short-term shot in the arm.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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With hundreds of thousands of Americans (still) losing their jobs each month, and new highs for continuing unemployment claims it is hard to see how things will not get worse or there could be much of a rebound.
Cullen Roche
Common sense would tell you so much. I see absolutely no chance of a robust recovery.