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A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

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Cautionary Signs for Consumer Spending


Consumer spending, which accounts for roughly 70% of GDP, is critical to the Fed’s optimistic view on the economy as it prepares to hike rates in December. However, consumer spending slowed in the third quarter, and this week’s Fed statement downgraded consumer spending, saying it is “rising moderately,” and no longer “growing strongly.”



Indeed, there are reasons for concern. This is evident from the nearby chart, which displays year-over-year growth in payroll jobs (top line) and real personal income (bottom line).
 
Growth in nonfarm payroll jobs has been easing since early 2015 and declined to a 32-month low, with key sections of the population faring worse than others. Meanwhile, growth in real personal income has slipped to a 33-month low. With job and personal income growth in downtrends, consumers’ ability to boost spending is clearly under question.

Related News & Events

Shunted to the Sidelines

ECRI October 31, 2016

For those without a high school diploma, the percentage of Blacks and Hispanics with jobs is back up near record highs, but the majority of non-Hispanic Whites have been jobless for seven long years. More

 

“Early” and “Late” Cycle Verdicts are Baseless

ECRI October 17, 2016

It’s illogical to assert that the likely duration of an expansion is around six to ten years merely because the last three U.S. expansions lasted that long. More

 

Upcoming Web Interview

Reuters November 4, 2016

ECRI's Lakshman Achuthan will be a guest on Reuters' Trading at Noon on Friday, November 4th at 12:00 PM.

 

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