Photo: Олександр, Flickr
After an ugly couple of weeks in the market, and a month’s worth of soft economic data, the debates are raging again about whether a recession is in the offing.Contra to the naysayers, this is interesting from Ben White at Morning Money:
High Frequency Economics’ Ian Shepherdson, a persistent bull, is not buying it, largely because consumer sentiment, which fell off a cliff in 2011, is not doing the same thing in 2012. At least not yet. Shepherdson: “Bearing in mind that consumption is more than 2/3 of GDP, and it almost ground to a halt in Q2 last year, this is pretty encouraging to me”
He then links to an updated UMich Consumer Sentiment chart to indicate that this huge chunk of GDP appears to be doing just fine.
That the consumer continues to do well is something we’ve been talking about for a while.
With gas prices surging, people expected that we might see some weakness at retail, but it hasn’t happened.
The latest reading from the ICSC-Goldman weekly retail sales index shows 4.5 per cent YOY growth representing one of the best readings in several months.
On the other hand, folks like Gary Shilling have been arguing that this is unsustainable, thanks to falling real wages. Spending is only up because the savings rate has been collapsing again, but there’s a limit to how much lower this can go: Eventually spending will slow down.