Monday, June 2, 2014

Ominous Consumer Spending Problems In the First Quarter GDP Numbers?

According to some supposedly expert economists and the White House, the economy contracted by 1% in the first quarter of 2014 because of the severe weather in those three months.  Thus, keeping consumers huddled in their homes.  Not buying the things that would have otherwise driven the economy.

But, consumers didn't stop buying in the first quarter.  Spending was actually up 3.1%.  Albeit, this was down from what CNBC said was "brisk" spending of 3.3 percent in the previous quarter.  So, its a little hard to believe that the consumer was absent due to weather.

What the report does show is something that I warned about in a previous post,  Retailers Are Signalling Economic Woes For 2014.  Despite the fact that consumer spending was up, corporate profits declined by $213 billion dollars in the same quarter.  What these contradictory facts show is that the consumer is being forced to pay higher prices for essential items like food, clothing, energy, and, especially, healthcare; thus reducing the amount of discretionary spending that would have normally driven corporate profits.

Thus, the consumer is at a recessionary tipping point where he or she can't afford to buy the kind of items that would cause the economy to expand.  This is what happens when you have a combination of stagnated wages and soaring prices for essential items like food and energy.  That is why I believe that weather had nothing to do with the first quarter slowdown of the economy, and, that is why I also believe that the second quarter will also contract; thus sending us into recession.


Frigid winter takes toll as US GDP contracts for first time in 3 years:

National Income and Product Accounts Gross Domestic Product: First Quarter 2014 (Second Estimate) Corporate Profits: First Quarter 2014 (Preliminary Estimate):

Food prices soar as incomes stand still:

Electricity Price Index Soars to New Record at Start of 2014; U.S. Electricity Production Declining:

Will ObamaCare Push Us Into Another Recession In 2014?:

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