Tuesday, March 30, 2010

Green Shoots = Weeds

The February release from the Bureau of Economic Analysis is out. The item which most of the news is hyperventilating about is that consumer spending increased in February.

Specifics are somewhat less exciting than news stories might have us believe, First, the increase was 0.3% over the preceding month. That is three tenths of one percent, and most retailers don’t hire when their sales increase by that kind of margin. Second, it is the smallest increase in the last five months, is half what the increase was in Oct of 2009, so the pace of recovery is slowing rather than accelerating.

The news is also not mentioning that disclosed in the same report is that personal income in February rose by 0.0% over the preceding month.

So we seem to be going back to an economy not only based on consumer spending, but one based on consumer spending using borrowed money. That worked really well the last time we did it, didn’t it?

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