Thursday, August 6, 2009

Consumption Stabilizing... Now What

While we looked at personal consumption earlier this week, it is important to note that over the shorter run, we are beginning to see signs of stabilization.

First, the brutal year over year consumption cliff dive...

But again... stabilization over shorter time frames.

The question is HOW do we possibly rebound from here when consumer credit is so hard to come by, personal balance sheets are maxed out, incomes are declining, unemployment is rising, AND we are starting from such a low base of savings. How low? I think this chart speaks 1000 words.

That's right. According to Christianson Capital Advisors (via the Welsh Investment Letter), Americans spent more on gambling then they saved in 2007 before this mess. How do you increase spending from that unsustainable level? You don't. Thus, the need to figure out where else we are going to get our sustainable rebound.

Source: BEA