Shilling Sees ‘Big Nose Dive’ in Consumer Spending June

Gary Shilling, president of A. Gary Shilling & Co., talks about the outlook for the U.S. economy, dollar and Federal Reserve monetary policy.


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00:00 Outlook: "big nose dive in consumer spending"
01:10 Discrepancy between unemployment, payrolls
02:26 Prospects for Fed policy, bond market
05:26 "Very optimistic" on U.S. dollar
07:26 China’s economy, growth outlook


Shilling Sees ‘Big Nose Dive’ in Consumer Spending June
Bloomberg, June 11 2008

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  1. bluestatedon commented on Jun 13

    3:30 am? I thought I was the only one working these crazy hours.

    So we’ve got:

    • Falling home prices, so no more cash out re-fis
    • Decline in funds available through HELOCs and CCs
    • Poor rates of new job creation
    • Continuing layoffs across many sectors
    • Decline in hours worked/week
    • State/local govt’s in great financial stress
    • Dramatic increases in gas/food prices

    The stimulus checks can’t make up for more than a small fraction of the effects exacted by these factors, and I agree with Shilling overall about the drop in consumer spending, although I think the big drop will occur in July and August as households start saving for the normal expenditures of the start of the school year. The runup in gas prices is really going to hammer vacation spending in particular. Motels and restaurants all over the country that depend on summer traffic will really be suffering from markedly decreased business.

  2. Mike in NOLA commented on Jun 13

    And China is down another couple of percent.

  3. dugafish commented on Jun 13

    the case shilling makes for the dollar is an interesting one and I happen to think its completely misguided. What he makes the case for in actually GOLD because if he thinks (and this is his assumption) US treasury’s and the US dollar will be the safe haven bet in a global recession/depression, I think he is wrong as rain. He paints the picture for a safe haven bid for GOLD-which will most likely be one of the few places to hide as global currencies unravel, competitive devaluations take place etc. Of course, the dollar may be a relatively better place to be (vis a vis other European and Asian currencies) given its long exhausting downtrend, etc. BUT-its seems to me that in the scenario he paints investing in the dollar versus the Euro (or Chinese Yuan) is a Hobsons choice at best. In his scenario, of which I agree as to how it plays out economically, Better off buying the best currency out there: Gold.

  4. Mike in NOLA commented on Jun 13

    After looking at the whole thing, I agree that there will be a global recession, but I think he overestimates the role of consumer spending in the future. It has been economists’ talisman since the collapse of the .com bubble. But consumers buying gadgets like cell phones is not the way out. Markets in developed countries are being saturated, e.g. cell phone sales in the US were down 22% y/y and I believe I read something similar about one of the Asian economies.

  5. John commented on Jun 13

    While there is likely to be some softening of consumer spending I don’t expect it to go off a cliff because basically incomes are only lagging slightly behind the “official” inflation numbers. What’s going to change surely is the allocation of that spending. Once the essentials of housing, food, gas, healthcare, etc are taken care of it’s going to leave a lot less dough for the goodies. Restaurants, clothing, mass luxury items like jewellry and handbags, travel/hotels particulary since the airlines are starting to price out the family traveller, autos, boats, cosmetology, all this sort of stuff. We also need to remember that the top 20% of income earners have now corralled about 56% of income and while the majority of these folks are going to be somewhat constrained they are certainly not yet in the poor house. So, overall spending down only slightly but a big shift in where it’s spent seems much more likely.

  6. Ghawier Downing commented on Jun 13

    I’m using Firefox on a mac and I can’t get audio from Bloomberg, anybody knew what’s up with that?

  7. schnauser commented on Jun 13

    I, too am a humble mac user with the same audio problem. for the love of christ why is this still a problem? what f*cking year is it, 1995?

  8. Joe Reeves commented on Jun 13

    I rarely pay any attention to Shilling anymore, but I do remember when I did he never had anything positive to say about anything. Seems like a guy who makes his living scaring people, which can be quite lucrative. A proverbial stopped clock.

  9. Greg0658 commented on Jun 14

    dugafish – imo copper is the value metal – windings in electric cars and windmills

    gold is a vanity metal and people have evolved in needs. Wearing a metal is dangerous these days, first analyzing its worth, second protecting it hanging on your body

    me, I value my library of music more than a gold something. The only gold you would find here is in electronic connections and recycling efforts are reducing that market

    if world gold reserves need to match the world money supply – gold is really really cheap right now

  10. Greg0658 commented on Jun 14

    I missed an aspect
    the girlfriend to boyfriend insurance policy
    prove how much you love me

    still … gold is out as a overall currency metal

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