[Prince]

It was announced today that May consumer spending was up a rather robust amount. Every month spending seems to keep increasing, and I'm shocked as to HOW this is possible. Every day in the news I read how the housing market is starting to crunch, how interest rates are going up, oil/gas prices are affecting buying habits, inflation fears are worse than thought, and then on the first day of the month they post last month's #'s and everything is fine and dandy.

Am I missing something here? From a personal perspective, I am spending less and have noticed a crunch in my finances in recent months. Are these numbers being artificially inflated and fudged to make the picture pretty? Every month I expect to see an article that says we're in economic trouble, but it doesn't happen. Through the work of voodoo economics the 1Q06 GDP growth was 5.3+ percent, which shocked me. Now gas prices are a cushy $3.00 per gallon and consumers are spending more than ever...

I must be stupid, because I really don't understand this at all (unless we have some proof the numbers are doctored). This is starting to break every rule of logic.

[Armageddon]

I dont believe any numbers the government puts out.

[strider3700]

Well this morning walmart warned that it's expecting a decline in june due to high fuel prices. Other retailers haven't though so we'll see. GDP growth is easy because of the way that it's calculated. I'm pretty sure it's possible to go down the tube while GDP is increasing at record rates.

Did the consumer spending include energy increases? I'm assuming that consumers still have some space on their credit cards to tap out. Remember to most this is a temporary thing so going in the hole to continue life as normal isn't a huge mistake. They're wrong of course

[Cynus]

Also, I'd guess that the rich could be spending a lot more, the poor spending less, and it looking like overall spending is up.

[FoxV]

notice that nobody has posted the US savings rate in a while.

So as long as the credit cow is still moo'ing people will keep spending. However the housing ATM is quickly closing down so it won't be much longer before TSHTF.

As for the GDP number, don't forget they are massively manipulating/understating inflation. So all that inflation they cover up comes out as extra GDP. I read an article once that said if you take away credit growth, and properly calculate inflation, GDP has been -2 to - 4% ever since the nasdaq bubble popped.

This explains the feeling most people have that while things have been booming recently, they personally feel poorer. Well guess what, odds are, you are poorer (the couple used as the example in that article is priceless)

[NeoPeasant]

How much of that is buying more stuff, and how much is paying more for the same stuff?

[willwork4food]

Hi - I'm new to this site, but I just had to post to this.

I'm a real estate agent (Canada - specialize in new homes) and I notice the same... People are purchasing way more than they can afford and the banks are letting them, which amazes me.

I have people coming through my doors with $70K incomes buying $400K + houses and the banks are approving their mortgages in hours. How can they possibly afford it? They can't.

The banks don't care... The mortgage brokers are approving these mortgages because they are desperate for commissions, and given the rising interest rates, I can't blame them. They have to eat too!

Now the problem is that come closing time, people can't even afford to pay for their lawyers, closing costs etc.

I have people buying $450,000 homes who are also buying upgrades - their upgrade cheques are bouncing. Some of these cheques are for less than $2,000. If you can't afford to upgrade your cabinets, you can't afford to buy the house... but they do.

I'm still shaking my head! (As I call buyers to tell them their cheques bounced).

I have a home buyer who has bounced 4 cheques - her first deposit bounced twice for pete's sake - good indication she can't afford house... but yet her bank says she can, so she just assumes she can... and my builder is happy to take her money because if she can't close, we'll sell it to some other and keep her deposit...

When they move in, they'll want new furniture, new curtains, etc... all paid for on credit. I see it every single day!

Half of my purchasers won't make it through the first year of mortgage payments- I can totally see it coming!

[FireJack]

Is it possible to have an enourmous economic crash over a day or week? At this rate things look to be getting very bad, ready to collapse bad. I wonder where we'll be in ten years.

[Heineken]

There's life in the party yet. Remember that peak oil also means peak consumption.

When the crap hits the windmill, we'll know it---and not one moment before. It will hit this vulnerable, overextended, hopelessly complex, and deeply sick civilization like a runaway asteroid.

[rwwff]

$this->bbcode_second_pass_quote('willwork4food', '
')Half of my purchasers won't make it through the first year of mortgage payments- I can totally see it coming!

[Vexed]

$this->bbcode_second_pass_quote('willwork4food', 'H')i - I'm new to this site, but I just had to post to this.

I'm a real estate agent (Canada - specialize in new homes) and I notice the same... People are purchasing way more than they can afford and the banks are letting them, which amazes me.

I have people coming through my doors with $70K incomes buying $400K + houses and the banks are approving their mortgages in hours. How can they possibly afford it? They can't.

...

[Jack]

Perhaps this will help:

$this->bbcode_second_pass_quote('', 'P')ersonal saving -- DPI less personal outlays -- was a negative $146.8 billion in April, compared
with a negative $128.2 billion in March. Personal saving as a percentage of disposable personal
income was a negative 1.6 percent in April, compared with a negative 1.4 percent in March.
Negative personal saving reflects personal outlays that exceed disposable personal income. Saving
from current income may be near zero or negative when outlays are financed by borrowing
(including borrowing financed through credit cards or home equity loans), by selling investments or
other assets, or by using savings from previous periods. For more information, see the FAQs on
"Personal Saving" on BEA's Web site.

[FoxV]

Hi Willwork' Glad to see a realestate agent on this board. Man is your input going to be fun in the coming months.

And just imagine, our housing situation is almost reasonable in Canada. 5%/20% down still required, mortgage insurance, and normal mortgage terms (although I've noticed that the terms of fixed mortgages are getting longer)

$this->bbcode_second_pass_quote('willwork4food', 'I') have people coming through my doors with $70K incomes buying $400K + houses and the banks are approving their mortgages in hours.

[mekrob]

So the US dipped into their savings accounts (or credit) by 150 BILLION dollars in a damn month? Holy fuck. That's $500 per person. And keep in mind that babies and little kids don't have this kind of money. So the average family of four went 2 grand into their savings in one (1) month! That can't be right. Are you sure about those numbers? I thought it was like 40 billion for all of last year.

[EnergyUnlimited]

Folks,

What do you think about idea, that PEOPLES ARE FEELING THAT WAVE OF INFLATION IS COMING.

They are taking huge (and "cupped") mortgages, hoping that there is a chance, that only worthless paper is going to be given back to banks.
High spenders have not much to worry if they expect hyperinflation coming.
They would enjoy now and pay back few suitcases of worthless paper later.
Sounds like a very good approach.

Is is a SAVER, who should worry in fact:
- His pension may turn into a dream.
- His shares/bonds may become worthless.
- His monetary savings may evaporate.
- His gold may be confiscated by government.
etc...

It may not be possible to save or preserve wealth, should economy fail.

[FairMaiden]

I don't know where in Canada you live, but this "5%/20% down still required, mortgage insurance, and normal mortgage terms"
is not true here on the West Coast. I bought my place with 0% down in '99. You can easily "borrow" the downpayment which makes it zero down (by all intense purposes)...we have mortgage insurance but that only helps if you die, become disabled or lose your job by no fault of yours (at least when I read it thru, thats what I got - maybe I'm wrong?). And we have PLENTY of variable rate mortgage out there...tho, we have changed the rules to make longer terms - 30 yrs now instead of only 25 (probably to help ppl buy more expensive houses than they really need).

[Jack]

$this->bbcode_second_pass_quote('mekrob', 'T')hat can't be right. Are you sure about those numbers? I thought it was like 40 billion for all of last year.

[fireplaceguy]

$this->bbcode_second_pass_quote('FireJack', 'I')s it possible to have an enourmous economic crash over a day or week? At this rate things look to be getting very bad, ready to collapse bad. I wonder where we'll be in ten years.

[Prince]

$this->bbcode_second_pass_quote('EnergyUnlimited', 'W')hat do you think about idea, that PEOPLES ARE FEELING THAT WAVE OF INFLATION IS COMING.

[strider3700]

$this->bbcode_second_pass_quote('EnergyUnlimited', 'F')olks,

What do you think about idea, that PEOPLES ARE FEELING THAT WAVE OF INFLATION IS COMING.