Consumer Spending Better than Expected

[Beet]

Give the good news its credit....
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By Courtney Schlisserman

March 6 (Bloomberg) -- The pace of borrowing by U.S. consumers increased in January for the first time in four months as rising joblessness caused Americans to pull out their credit cards to take advantage of post-holiday discounts.

Consumer credit unexpectedly rose by $1.76 billion, or 0.8 percent at an annual rate, to $2.56 trillion, the Federal Reserve said today in Washington. Credit decreased by $7.48 billion in December and a record $9.13 billion in November, more than previously estimated in both months. The Fed’s report doesn’t cover borrowing secured by real estate.

The value of car and truck loans rose 0.7 percent while deep discounts at retailers such as Limited Brands Inc. and Macy’s Inc. boosted consumer spending in January for the first time in seven months. Still, the gains in credit and spending may be short-lived as payrolls drop and banks remain reluctant to lend.

“Consumer credit bounced in January on the heels of sharp declines in November and December,” Steven Wood, president of Insight Economics LLC in Danville, California, said in a note to clients. Overall, Wood said, “consumers are deleveraging along with the rest of the economy, which “does not bode well for real consumer spending in the months ahead.”

Economists had forecast consumer credit would drop $5 billion in January, according to the median of 27 estimates in a Bloomberg News survey. Projections ranged from an $8.1 billion drop to a gain of $3.2 billion.

Revolving debt such as credit cards increased by $926.5 million. Non-revolving debt, including auto loans and mobile home loans, rose by $830.2 million.

Consumer Spending

Other reports indicated consumer spending improved in the first two months of the year as Americans seized on retailers’ discounts. Wal-Mart Stores Inc., TJX Cos. and Aeropostale Inc. yesterday reported better-than-anticipated February sales.

Retailers had less merchandise left over from the holidays in February and offered new spring items, bringing more people out to shop than the month before, Stifel, Nicolaus & Co. analyst Richard Jaffe said.

Retail Metrics, a researcher, said U.S. comparable-store sales rose 0.7 percent in February, better than the 1.1 percent decline analysts had estimated and the first positive result since September. The outcome was helped mostly by Wal-Mart, Retail Metrics President Ken Perkins said.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aLToLRMtZ6wM&refer=home

[Beet]

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I don't think the service sector as a whole is a waste- there is certainly healthy demand for services, per se. The financial sector won't recovery for a long time probably, but that's as much a function of how bloated it was at one point in this decade than anything else.

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Trying to regress to an industrial economy won't help, IMO. While it's true we need to get our trade picture in order, there's a reason that we don't want to (and can't) become another low cost industrial exporter. For one thing, the current low cost industrial exporters only exist because we have been what we have been. If we become them as well, there will be no one to consume what we produce. Rather, some of them must become more like us. For another thing, our industrial production hasn't exactly gone away. It is still at 2000 levels, which were very high-- although it is comparatively more in high technology and electronics and less in autos, than it was in 2000. Just bcause industrial employment is down it doesn't mean we have lost industrial production.

[Beet]

I don't think the service sector as a whole is a waste- there is certainly healthy demand for services, per se. The financial sector won't recovery for a long time probably, but that's as much a function of how bloated it was at one point in this decade than anything else.

I don't think I was implying the service sector is a waste, but rather that it enlarged far beyond its real needs in the economy to make up for manufacturing losses.  For example, there simply is little need for employees for thousands of stores selling crappy over-priced apparel to teenage girls - I have often been surprised over the past few years how much that dominates the malls of this country.

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I'm not suggesting that we become a low cost industrial exporter, Beet.  All I'm just saying is that the trade imbalances must be dealt with (so we probably agree there), and in order for that to occur, the US must manufacture more of its own products (and yes - tech is part of that).  This, in turn, will help any recovery to replace job losses caused by the collapse of the financial/service sectors in the upcoming months.

In that case, it seems that we're in agreement. Sorry if I misconstrued you.  Statements like 'the service sector ... is in the midst of complete collapse' will do that.