Here are the key numbers (in red) in Uncle Sam's November Personal Income and Outlays report (the July :
Common sense says that the chart's results after adjusting for inflation are more important (identified as "Chained [2000] dollars") than those in current dollars. Consmers' disposable income went up 1.0% in real (after-inflation) terms in November after a 0.7% increase in October.
It took a month for real consumer spending ("Personal consumption expenditures") to catch up to the increased disposable income, but it did so in a big way in November. The 0.6% real increase is the highest in over three years. Both improvements are objectively good news, and are largely due to sharply declining gas prices.
This is pretty fundamental Econ 101 stuff, isn't it? As you can see from the headlines and the treatment of the real spending increase that follow, the business press mostly flunked, and badly:
- Ruth Mantell at MarketWatch -- "Consumer spending drops 0.6% in November." She noted the real increase in spending, but not its significance.
- David Goldman at CNNMoney.com -- "Americans keep tighter grip on cash; More signs of economic trouble: Personal spending drops for 5th straight month. Personal income sinks. Orders for big-ticket items also fall." Unlike Willis's correct assessment, Goldman incorrectly and gloomily claimed that spending declined overall and "is a worrisome sign for the holiday shopping season."
- Thomson Financial News, carried at Forbes -- "Nov. Consumer Spending Down 0.6%, Personal Income Down 0.2%." The "real" spending news was in the third paragraph.
- Karen Jacobs at the Reuters Shop Talk blog -- "Check Out Line: Spending Still Down." Money quote: ".... evidence continues to mount that consumers are cutting back spending.." No they're not, Karen.
- Bob Willis at Bloomberg -- "U.S. Consumer Spending Declines Less Than Forecast." The article itself is fairly evenhanded. Willis noted that the real spending increase was the first in six months, and that "cheaper gasoline gave Americans more cash to spend for the holidays."
- Martin Crutsinger at the Associated Press -- "November personal spending falls 0.6 percent." As usual, Crutsinger was the most biased and negative of the bunch -- "Consumer spending fell for a fifth straight month in November, the longest weak stretch in a half-century, while incomes declined under the weight of massive job layoffs." Three paragraphs later, he acknowledged that this fifth straight month of (not inflation-adjusted) "weakness," after inflation, "was the best showing in more than three years." He ignored the improvement in real disposable income.
Crutsinger further insisted that:
..... economists think the overall trend for consumer spending is down, given the problems facing the economy including ..... a severe financial crisis that has cut off access to credit for millions of borrowers and a massive wave of job layoffs.
First, I'm still waiting for the stories of real flesh-and-blood borrowers with good credit scores who can't get consumer or mortgage loans. If they're out there, their numbers are very small. Second, the 93%-plus of Americans who have jobs are, as noted in November, are seeing even more improvement in spendable cash in December, as gas and other energy prices are still falling. Third, very low interest rates are providing opportunities for homeowners to lower their monthly payments or take out cash by refinancing. Not surprisingly, refi applications are way up. The response to those who point to the weakness in Christmas shopping season sales as justification for wailing and gnashing of teeth is that without the November improvements, things would have been much, much worse.
The one positive report that I saw was written by the New York Times's Jack Healy; the headline is actually "Consumers gain more purchasing power." The only place I could find it was in Google cache; the Kansas City Star, which originally published it, no longer has it. It appears that Healy's employer, the Times, never ran it.
It's hard not to think, especially based on the preceding paragraph, that optimism is forbidden -- until, oh, maybe a week or so after after Barack Obama's stimulus package passes.