The US economy is sliding into a recession with frightening speed.The U.S. Census Bureau published today their October estimates of U.S. retail and food services sales. The number fell 2.8 percent from the previous month and 4.1 percent below October 2007.
This absolute decline in sales is very unusual. Normally, sales should be rising, not least because of inflation. Each year, prices go up, so even if everyone simply bought the same basket of goods year after year, retail sales would go up at the rate of inflation.
I put two arrows onto the chart above. The first, which covers the US recession in 2001-2, shows that retail sales basically flattened out when the economy weakened. The second arrow highlights the most recent data. Retail sales are actually falling despite the 5 percent US inflation rate.
Thus, it would appear that US household consumption is collapsing. Since it makes up about 70 percent of US GDP, the US must now be falling into a deep downturn.
So much for those 1 percent interest rates.
7 comments:
Do you have a similar chart for the UK? It would be great to make a comparison.
Alice,
FWIW, Bernanke claims the 1930s depression in the U.S. was caused by a collapse in aggregate demand - D'oh!
If we were on a gold standard, I'm quite certain we would be facing deflation. It's a tougher call under a fiat system.
A lot is due to the collapse in petrol prices; so bad but not - yet - catastrophic.
And this is just a beginning of a beginning... the first wave of mass layoffs is under way; the next (bigger) will occur in spring, after weak Christmas sales - and than the next, and the next...
Alice - great blog! It is so good for the soul to know that there is another sentient human being somewhere... Keep up the good work!
http://2.bp.blogspot.com/_MXByb84VSgE/SR6FCObtZRI/AAAAAAAACEg/mv_lC2CfRrs/s1600-h/article-1085578-02770C2B000005DC-609_468x664.jpg
Unrelated but interesting nonetheless.
Right, I am confused. People were supporting spending, and capitalism by incurring debt. Realising this was foolish, or since they have lost their jobs, or have otherwise lost their creedit they stopped. Isn't this a readjustment? Isn't the end of rampant spending a good thing?
Ten years of mega-unemployment coming. It's a good job Japanese cars last so long... Tux
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