Q3 data shows that personal consumption spending, (inflation adjusted) fell at an annual rate of 2.7% — the biggest fall since Q2 1980. The economy contracted at a rate of 0.5%.
And, as Floyd Norris shows, its likely to get worse:
“Each month, the Conference Board asks Americans about their plans for purchases of major items over the next six months, and people have never been more reluctant to spend.
This month, according to preliminary figures released this week and shown in the accompanying chart, just 1.9 percent of the respondents said they planned to buy a house and only 3.7 percent said they expected to buy a car.
In the more than 40 years that the survey has been conducted, the previous low reading for car purchases was 4.5 percent.
Moreover, the survey also asks whether the person plans to buy a new car or a used one, or is not certain. This month only 1.3 percent said they planned to buy a new car, also the lowest ever.
The home buying figure was not a record low, but it was the lowest since 1982, when interest rates were in double digits amid a deep recession.”
Now, we are always wary of surveys, which tend to be misleading. Humans on this planet are particularly bad at forecasting their own behavior.
But if we look at their actual spending, we see an ugly trend. We may very well still be in the 1st half of the contraction, with the really nasty economic stuff still to come.
This morning’s chart porn:
Chart courtesy of NYT
Americans Have Lost Their Appetite for Spending
NYT, November 28, 2008