Found these gems in my reading list. If our foresight was just half as good as our hindsight we could all be rich! – WD0AJG
From the
REFLECTING BACK ON 2010
by Consumer Metrics Institute
Reflecting back on 2010, we can offer a number of observations directly from our data:
– GDP growth rates can be significantly impacted by non-consumer line items. Manufacturers building inventory, export growth, increased governmental spending and (counter-intuitively) consumer cut-backs on imported goods have all increased the GDP during portions of 2010 even as “real final” consumer commerce remained relatively flat.
– This recession was not a shared experience. Some consumers were especially hard hit by the downturn, just as they may have been the very same demographics that benefited the most from the expansion that led up to the 2007 peak. Unfortunately, the consumers who provide the transactions that we capture appear to be disproportionately among those most severely impacted by this recession.
– At year-end 2010 consumers were still cautious about the long term. In effect, the massive stimulus applied by the government during 2010 still didn’t significantly improve longer term consumer confidence. Households are still deleveraging, albeit at a moderated pace. Consumers are still reacting to their own personal (and highly localized) assessments of the employment and housing markets, and they currently see no reason to significantly change their new-found conservative behaviors.
– Recession-fatigued consumers can self-medicate with holiday spending while still adhering to long term outlooks. December consumer confidence surveys clearly indicate that consumers are not yet convinced that the “recovery” is real or sustainable. A corollary to that observation is that retail sales surveys can be a misleading indication of the quality of commerce.
We can also offer some other general economic observations more broadly hinted at in our data:
– Infrastructure spending by governments is poor way to stimulate the economy. Repaving roads is a great way to spend vast sums of money on asphalt and concrete. It is a less efficient way to create quality long term jobs, revitalize the housing market or (evidently) help the consumers we track.
– Corporate earnings can be a misleading indication of the health of national commerce. Major U.S. corporations are in a privileged position in the economic food chain, with access to overseas markets, commercial paper, cheap loans, ruthless human resources departments, governmental contracts and stimulus monies. The people actually creating new jobs don’t have such access. This is the business corollary to the “not a shared experience” mentioned above — and it directly impacts the vast majority of the on-line merchants that provide the flip side of the consumer transactions we track.
– In time the unemployed simply disappear. They transform into students, the underemployed, the “discouraged,” the prematurely retired or the chronically starving self-employed. Compared to the 1930?s however, a surviving second household income has often mitigated the human suffering — even as upside-down mortgages have prevented the mobility necessary to pursue elusive jobs. Many of the households caught in those binds are part of the “tech-savvy” cohort of on-line shoppers that we have tracked since 2004.
– Rescuing banks does not stimulate the economy. Saving banks may be necessary to prevent economic Armageddon, but it is not sufficient (in and of itself) to ensure a self-sustaining recovery. When provided with enough taxpayer cash to be both liquid and solvent, banks will promptly act in their own self interest. And changing regulatory benchmarks and/or accounting rules only facilitates that behavior. Our data includes the impact of the housing sector on the economy, and rescuing the banks has clearly not revitalized that industry.
– Ben Bernanke can’t force people to borrow money that they don’t want. And as mentioned above, he also apparently can’t force banks to lend money they would rather use for other purposes, especially if all the highly qualified borrowers don’t need any more debt. Over the past three years the Fed has discovered the limits to what “policy” can do, and the quality shift in the transactions we track indicates that our consumers still have no interest in leveraging back up.
– By “feeling the economic pain” among their constituents, politicians have promised results they don’t have the means to deliver. Blame this political empowerment on Keynes, although it has certainly created a nice gig for Alan Greenspan and his successors. The problem is that now the “policy” cupboard has gone bare. Fortunately, Lincoln was right: you can’t fool all of the people all of the time. Deep down the public knows that politicians can’t really fix things — especially if gridlock is setting in. Unlike 2008, this year our data never did see a substantial uptick after the electoral “FUD” (Fear, Uncertainty and Doubt) was resolved. Our consumers seem to know that — self medicated holiday cheer aside — the macro picture isn’t going to change anytime soon.
We are in the business of collecting data about on-line consumer transactions for discretionary durable goods. We’re not going to change what we do (as some have suggested) when the GDP stops tracking our on-line consumers or when the housing market becomes irrelevant within the latest quarter of economic data. Our job will remain the publication of what we collect, however contrary that data may be. And right now that data is materially weaker that many people would like to believe.