They Out-Spent and Out-Earned inflation without breaking a sweat, and saved some too.
By Wolf Richter for WOLF STREET.
I had too many irons in the fire yesterday, and didn’t think I needed to cover the consumer spending data released by the Bureau of Economic Analysis, because, adjusted for inflation, it was about like it was before: Our Drunken Sailors, as we’ve lovingly and facetiously called them all year, are making record amounts of money, with incomes beating inflation nicely all year. And they did it again. And they went out there spending it, and they still had money left over that they saved. Kudos.
But that’s not what the headlines made you think. The WSJ hilariously said in its headline, “Consumers Pulled Back on Spending,” and Bloomberg’s headline ridiculously said, “Americans Are Finally Turning Frugal After Splurging over Summer.” I mean, Americans frugal? Come on! So now, I gotta wade into it to straighten this mess out.
Consumer spending, adjusted for inflation, rose by 0.2% in October from September, outspending inflation at a good clip. Year-over-year, adjusted for inflation, spending rose by 2.2%, near the top of the growth range over the past 15 months. The three-month moving average, which irons out the month-to-month ups and downs and shows the trends better, also rose by 0.2% for the month and by 2.2% year-over-year, near the top of the range for the past 18 months! Note the flat spots late last year and in the spring this year. Those were the slowdowns. Not now.
Spending on services, adjusted for inflation, rose by 0.2% for the month and by 2.3% year-over-year, the fastest growth rate since March.
The three-month moving average rose 0.2% for the month and 2.2% year-over-year.
Of the total amount of consumer spending, 65% goes to services. The remaining 35% are spread among durable goods (cars, computers, furniture, appliances, etc.) and non-durable goods (food, gasoline, clothing, shoes, supplies, etc.).
Inflation has moved from goods to services. The core PCE price index for services rose by 4.6% year-over-year, according to the BEA yesterday. And consumers are outspending this inflation without breaking a sweat.
You can see in the chart that in the spring, spending on services, adjusted for inflation, grew at a slower rate, or barely grew, but then re-accelerated over the past four months, amid the huge travel boom.
Spending on nondurable goods, adjusted for inflation, jumped by 0.3% in October from September, the fastest rate in four months; and it rose by 1.3% year-over-year.
The three-month moving average ticked up by 0.1% for the month and by 1.1% year-over-year.
Nondurable goods include food, beverages, fuel, clothing, shoes, supplies, etc. You can see the pandemic frenzy through 2020, followed by the slowdown, when people started using their bales of toilet paper and other stuff stacked in the garage because they couldn’t sell it on eBay? But in recent months, spending on nondurable goods has accelerated again:
Spending on durable goods, adjusted for inflation, dipped 0.3% for the month, but was up by 3.7% year-over-year.
The three-month moving average rose by 0.2% for the month and by 4.2% year-over-year.
This continued growth of spending on durable goods, after the huge spike during the pandemic, has flummoxed a lot of observers; they expected Americans, with their homes stuffed to the rafters with this stuff, to cut back and shift spending to services. For a few months after the stimulus frenzy in 2021, there was some of that. Then spending on durable goods took off again.
Where does all this money come from? Record incomes.
Personal income from all sources, adjusted for inflation, but without transfer payments from the government – so this is income from wages, interest, dividends, rental properties, farm income, small-business income, etc., but without Social Security benefits, unemployment insurance, VA benefits, etc. – jumped by 0.3% for the month by 2.3% year-over-year (adjusted for inflation).
This means that consumers have out-earned inflation by a fairly wide margin, and that’s where this spending growth comes from.
This income growth is a function of rising employment, rising wages and salaries, rising interest incomes, rising rental incomes, etc.
Per-capita disposable income, adjusted for inflation (total income minus taxes), jumped by 0.3% for the month, the biggest increase since May; and by 3.9% year-over-year.
This is what consumers had left to spend on goods and services and to save. And it has been outrunning inflation by a wide margin all year, after a steep setback due to inflation in 2022.
This chart shows the closeup of per-capita disposable income, adjusted for inflation, as percent change from a year ago.
In other words, per-capita disposable income has been outrunning inflation by 3 to 5 percentage points all year. This is where the money came from to do all this spending:
I took the data back only to June 2022 to cut out the huge distortive effects of the stimulus payments, and the year-over-year comparisons to those stimulus payments a year later.
The personal saving rate ticked up to 3.8%. That’s the portion of disposable income that consumers didn’t spend but put aside in various ways, from contributions to their 401ks to having a little extra in their checking accounts. That rate was somewhat lower than in the years after the Financial Crisis, but higher than in the years before the Financial Crisis. It’s amazing that our Drunken Sailors are spending so much but are still able to save. And there is no reason for them to slow down unless they lose their jobs.
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Interest Rates up again Wolf ?
Wall Street is 100% certain that the Fed is going to pivot and that interest rates will fall towards zero (regardless of record levels of US Treasuries) and that is what is propelling stocks to record highs!
Actually the income and spending in this article is far more of a contributor to stock prices than some hypothetical rate cuts on a dot plot.
Not true.
For example, AAPL ‘s revenues has been declining for last few quarters but stock is still flirting with ATH.
This is about rate cuts.
Are you serious Clark?
@KJVol,
“Are you serious Clark?”
Yes, Santa and his reindeer were spotted over the Artic.
See my magic:
1. Everyone only measures dollars now.
2. I create dollars amd Everyone believes that I have created wealth, cars, foods, medical care, insurance…..
Pulling commodities out of your fundament…how long can you cast your spell?
The original Marco,
I’m good with where they are right now. Wait and see makes sense at this point.
Agree!
In any kind of rational investing scene, IMO we would already have the treasury yields at 6%+ or ++.
In THIS investing situation, all one can do reasonably is wait to see what the GUV MINT and the FRB nutty and nuttier folks do next.
As a kid in the deep south in the 1940s, there was a ton of pressure to buy ALL the bubble gum my income would provide, as it was almost certain to go up… and it did, based on rational results of demand vs supply; such rationality is gone now, perhaps never to return, or at least not soon…
”Get it while you can!!!” And BLOW them bubbles till the whole world blows,,, eh
Bubble gum is flexible, at least for a while. Whereas the Dots indicator is inelastic, I do believe, and is as reliable as sunrise and sunset.
Nothing is forever.
If the Federal Reserve just “wait and see,” then our only hope to stop inflation is Geopolitical. Perhaps the recession in Europe or OPEC+ cutting production will give us all relief. Near-long term the Chinese are working on Free Electron Lasers instead of the Deep Ultraviolet Lithography machines that are sanctioned; a breakthrough ability to directly write on a silicon wafer might greatly ease the supply chains.
Yeap, jobs is the next mantra, we will see if the FED blinks again as in the past. But when things get ugly, you’ll really understand if the FED plays the right game.
Wolf, when we spend thousands or hundreds of thousands buying gold and platinum, where does that show up? Durable goods?
That’s funny, I mean I get your point, but it’s funny. There may be a day when gold and platinum can be “manufactured.” People have tried to make gold for thousands of years, unsuccessfully so far. They’re mined. And so they’re not in manufacturing. The mining production itself — not what you buy — if done in the US shows up in “industrial production” under “mining.” The metals that are imported show up under “imports,” where gold shows up in two categories, “monetary gold” and “nonmonetary gold.”
I hope the fud (f’ed up dudes) finally realize that higher rates are actually good for the economy. Interest rate repression has to go!
How about fud f****ed up dollar
The dollar is in much better shape than a lot of other currencies.
Why, Marco — to inject even more money into the economy via the interest income channel?
MW: Dow industrials (DJIA30) close with gain of 295 points, or 0.8%, as Dow posts highest close in nearly 2 years, equities extend rally to five straight weeks
I’ve read somewhere November had the fastest loosening of financial conditions on record. Then Powell yammered something today about “premature to cut rates”, and boom, 10-year rate dropped another 0.15%.
Because the Fed has zero credibility. Nobody trusts that he won’t pivot back to ZIRP the moment the going gets tough. That’s why the markets are reacting the way they are.
No one is wiser than the market. Market is the place where the real money is made or lost.
I went Long after seeing reaction of FED and Treasury in March-2023 banking incident which was not really a crisis in any way.
I am sure FED and Govt won’t let market go down especially in an election year.
You got it. The casino controls the eCONomy.
Jon, I wouldn’t say the market is wise.
A booming stock market doesn’t help for elections nearly as much as the political class thinks it does. Most Americans don’t have that much in stocks, if any.
Inflation is a much bigger problem, which is why the average American keeps answering polls that they think the country is economically on the wrong track.
«A booming stock market doesn’t help for elections nearly as much as the political class thinks it does.»
It helps *donors* a lot, and donors are far more important than voters.
«Most Americans don’t have that much in stocks, if any. Inflation is a much bigger problem, which is why the average American»
“Most Americans” and the “average American” often don’t vote and as a rule don’t donate, so they don’t matter.
They used to have *some* influence in politics via the labor union donations to campaigns, but that has since a long time ago become a small thing.
As to any issue, the question in politics is “do you donate or vote on this issue?” if the answer is “no” then their opinion is irrelevant. USA politics, like everything else, is pay-per-play.
There are 6 seasonal, endogenous, economic inflection points each year.
(they may vary a little from year to year):
Pivot ↓ #1 3rd week in Jan.
Pivot ↑ #2 mid Mar.
Pivot ↓ #3 May 5,
Pivot ↑ #4 mid Jun.
Pivot ↓ #5 July 21,
Pivot ↑ #6 2-3 week in Oct.
These seasonal factors are pre-determined by the FRB-NY’s “trading desk” operations, executing the FOMC’s monetary policy directives (in the present case just reserve “smoothing” and “draining” operations, the oscillating inflows and outflows, the making and or receiving of correspondent and interbank payments by and large using their “free” reserve balances).
Now you tell me! If I’m sentient in 2024 I’ll wager some play money on this calendar. Perhaps you can fit another explanation involving earnings “buy the rumor, sell the news”
Wolf, what do you think the Federal Reserve will do? Hold rates higher for longer because the economy is so strong, or yield to Wall Street & cut rates next spring anyway because the market already has them priced in, avoiding market disruption?
The market has gone through massive phases of denial that often lasted for months, and then the players pulled the rug out from each other as they were trying to get out of their bets. See the 10-year yield:
Looks like a completed 5 wave impulse wave?
Maybe finishing up an a of an abc also?
LOL, typical elliott wave “analysis”.
The market is about to begin a historic crash!!!! … UNLESS it makes new all time highs.
Stay tuned next year for our revised wave count. 12345 or ABC or WXYZ or 54321 or LMFAO
“Technical analysis”. A highfalutin way of saying “baby needs a new pair of shoes!”
I see no shoulder on that chart! Tank you Wolf.
Clearly the infamous “butt crack pattern” shortly after the start of 2020 was the optimal time to invest. Best anatomical chart I’ve seen – maybe a toilet should but placed just below that reversal point.
Yeah, things are so good maybe the landing really has been cancelled. Would be sad for those loading up on bonds now and are hoping the fed cuts the short rates to un-invert all the curves because of a recession, and all that ends up happening is long rates go higher because things are just so awesome.
Please keep talking about this until it happens! Will it into existence!!!
Personal income, less transfer payments, adjusted to inflation Y/Y is
rising because inflation Y/Y is falling.
But fiscal spending certainly isn’t. Bond yields are temporarily moving in the wrong direction.
I took my family on vacation to Tahoe for Thanksgiving day weekend. Company car, therefore company gas to get there. Sat through a timeshare presentation so lodging was only $259 for the 4 nights.
On Saturday, we hit the road to drive around the lake. Wife and daughter got Starbucks. We ate lunch with a nice view of the lake. We had dinner. We had Coldstone for dessert.
I spent over $400 in food that day.
I wish I could be as fortunate in my day of company car the vehicle was for company business only and not insured for any type of personal use . Congrats on the benefit!
Same here, company car personal mileage was always taxable as personal benefit/income. Had to track it weekly and document every business mile as to what, where, who, and when. Any non documented business use was personal use and the company notified the IRS of it.
The IRS new hires are probably looking for stuff to do right about now.
SOL – If you stayed at the Marriott Timber Lodge / Vacation Club over Thanksgiving weekend, we might have crossed paths……
Hilton Grand Vacations… sort of. The nice place was full, so they put us in a rundown old property. Whatever, it was cheap and clean.
I’ve been trying to rent places with a kitchen since eating out is getting so expensive. We were down in Carmel for a 50th wedding anniversary a few months back and a simple breakfast for the four of us was over $100 (Brunch at Clint Eastwood’s Carmel Mission Ranch would have been twice as expensive)…
When we went to Vegas this year we had a kitchen. Saved a ton of money by taking food from home. The restaurant prices were insane.
$400 for a family with 2 meals and extras doesn’t seem outrageous, especially in Tahoe on a holiday.
It does, actually. Quite. But if overpaying for standard fare in a tourist trap is one’s idea of la dolce vita, then enjoy it all to hell.
Part of the problem with Tahoe is many people own 2nd homes there and many expensive developments. For years now it is hard for businesses to get workers as not affordable rents and not exactly a commute destination.
I made the mistake of using all my gold in my teeth so I have an additional step of hiring a dentist.
This will cause November consumer spending, to be released next month, to tick up even a little further. Thank you.
Exactly. Everyone acts shocked about spending going up as they quote their personal anecdotes of spending wads of cash on trips, meals and other goodies.
Unmentioned, are the piles of boxes full of chinese Amazon junk that are probably sitting on their front porches when they return home.
America is a consumer society and 70% consumer economy. We happily consume vast amounts of future landfill every month.
“Future landfill” – that’s what I’ve been calling it, LOL!
I’ll never understand why you people make travel so rare and complex. Why do you save up for a vacation? That makes no sense. I travel all the time. Every day is a vacation. I get free rides, and when I get hungry I go sit by the door of a restaurant and people give me free food. Sleeping outside is actually great. If i ever want some local currency to buy something it’s never hard to get some.
Everyone make sure to read Absur Ditty’s screenname out loud.
Lol, and it’s so fitting.
Off topic, but I have a very well-heeled friend in California complaining about the economy and out of control inflation. Would like to leave, but business ties make it complicated and hubby liked the ocean.
He can’t be that well-heeled. I’m only regularly-heeled and the economy seems to be going gangbusters and inflation seems to be a problem for renters and truck buyers, for the rest of us, not so much.
Food buyers? Have you not been reading?
Yes, Djreef, I have been reading and I agree with Kent. Sure, groceries are more expensive but then so is income so it’s a wash.
Escierto and Kent,
Whatever lol.
I wonder what the percentage of signings are considered par-for-the-course when it comes to time share presentations. I knew someone in “direct mail marketing” back in the day (before the internet), and she said that a successful campaign was getting a .5% reply on mailings. After that came the closing per returned business reply card which she didn’t know. Her job was only to sell mail campaigns to advertisers.
I’m counting on you to back out of any timeshare deal you were tempted to make. Lake Tahoe and environs is a very tempting place.
Thanks Wolf! You said, “The WSJ hilariously said in its headline, “Consumers Pulled Back on Spending,” and Bloomberg’s headline ridiculously said, “Americans Are Finally Turning Frugal After Splurging over Summer.” I mean, Americans frugal? Come on!”, and you are absolutely right!
The owners of the financial media seem to desperately want a recession. I have to assume that they have been caught offside on interest rates (like comercial real estate) and need a recession so they can get out from under their bets.
Another possibility is that all of this constant negative financial media causes poorly informed retail investors to give up their strong positions.
Wolf, your sanity is sure helping me climb this wall of worry.
The problem is the media needs a recession for the rate cuts that are priced in. The Fed is not going to cut rates in March if the economy is healthy. It just isn’t happening.
Zactly.
That’s the problem with the numbers. While inflation might be coming down somewhat in some areas, there is no recession in sight. I don’t see the Fed dropping rates just for the hell of it. When they did that in 2018, they reinflated the bubble, and now there is an understanding that that leads to inflation.
Great point!
Definitely not frugal but perhaps smarter. I am spending a lot but look for good deals and such. Simple things like getting $100 of Dominos gift cards at Costco adds up when you take advantage of apps and all the other marketing companies are spending to get your dollars. The concerns over the economy didnt change my spending habits, just how far my dollars would take me. Might not be the case for all however.
Why scrounge for a measly 5% at Schwab when you can get 25% off on Domino’s gift cards…
I’ve done the same, spending a lot more time looking for deals and cooking almost exclusively at home now. Better quality of food that way too.
I’ve been low balling items on eBay and making offers left and right…not all sellers accept them but a fair amount do and Ive been fortunate to get a lot of things Ive wanted or been watching for a long time.
Yeah, I just finished my Christmas shopping on eBay…got an unplayed VHS copy of Son of Flubber, some Lothar & the Hand People 45s and a whipstitched Naugahyde stun gun holster,all at one helluva rebate.
Retail’s for suckers.
Gee, Thomas, I’m glad your sharing your knowledge about what the media owners want: “The owners of the financial media seem to desperately want a recession.” I just with I knew that those owners really wanted, like you do.
No sarcasm there. Your investments must be doing great…
Oh well, gold and silver pricing are saying that something different may be on the way. Good luck to everyone trusting banks and investment firms to hold your wealth, besides, it’s all just paper like bonds and stocks. Solid mass substance (Matter, occupies space) will once again have meaning.
I know, so barbaric. Not proper like the Fed and government has done.
I tried to pay my rent with an ounce of gold. Didn’t work. Maybe when Armageddon hits, it will work, but I don’t think I want to be around to watch that show.
Hopefully Michael Bay won’t be the director.
William Leake-
I discovered a complicated 2-step process to pay rent with gold:
1) sell gold
2) pay rent
(In free-markets, this works with other assets too.)
The idea of using a naturally limited asset (such as metals) as money was gradually killed off through 1913 money and banking legislation. The coffin was sealed over the next 60 years by Lord Keynes and followers. Debt-based fiat currency has reigned semi-successfully for the next 50 years, except that we are discovering that debt production is VERY hard to limit.
As Brant Lee suggested above (and many world-wide central bankers seem to have recently endorsed through there actions), “money,” and what BACKS money, might return to self-limiting physical assets.
Metals as the base for money could only happen if our present central-banking and cryptocurrencies experiments fails. But that could never happen…
Sorry about that last mangled sentence!
I used to be amused when gold bugs would describe gold as something other than a currency, as though it has some god-given sanctity or absoluteness. “But I was so much older then…
To put it more simply, gold may or may not be a store of value.
Gold is not a medium of exchange.
“ I discovered a complicated 2-step process to pay rent with gold:
1) sell gold
2) pay rent”
You forgot step 3) pay 28% income tax on the gain from sale of a colllectible
I received a Krugerrand as a Xmas bonus at work one year. Cashed it in that same week, ~$325.
The difference between precious metals like gold and silver and the crummy little pieces of paper in your wallet is this:
“Gold is money everything else is credit”.
J.P. Morgan
Morgan made his fortunes with credit. Do you think he was just pulling someone’s leg?
Of course he made his fortune with credit. Credit is a tool to be used wisely not a substitute for actual wealth. In today’s America every fool with a credit card thinks he is rich even though he has nothing. The biggest pack of fools are those who run the government finances and believe that because they can print paper, they can create wealth. WRONG.
Time is money, and you’re frittering yours away defending BS.
Zerohedge made my day last week with the most hilarious headline i ever read:
“mysterious explosion in gold prices (China ?) ”
It’s a mystery. No idea why anyone would buy Gold.
Jim Rickards is right. Americans simply don’t understand Gold.
That “mysterious explosion in gold prices” was a 6% increase spread over a two-week period, the sum of daily small ups (and a couple of downs). Yes, ZH’s headlines are a hoot.
Everything Is Awesome!!
R2K to da Moon!!!
UPS workers making $170K, plumbers making $200 an hour, truck drivers making six figures. Bidenomics is real.
That’s total comp (including benefits) and it’s for their long haulers. Details…
I’ve spent my career as a plumber, OTR truck driver, and custom home builder. Plumbing is stupid easy, trucking – not so much.
Google kind of disagrees. A little.
“The average plumber salary in Spokane, WA is $74,100 per year or $35.63 per hour. Entry level positions start at $56,856 per year while most experienced workers make up to $120,000 per year.”
Spokane County is pushing 600,000 people, medium cost of living.
40 year real estate appraiser
The trillions of national debt increase since 2016 /17
Is very coincidentally similar to the increase in the gross residential real estate market
50 to 70 % home price increase is the major factor that this bifurcated economy has a long shake out period
Normally home values would collapse
I am dubious and expect the next leaders to promise an faux dangerous remedy
Baby boomers 0 debt and 5.25% interest
17 to 45 year olds who don’t own a home
Big big problem socially and economically
400 PHDs in the federal reserve really made a San Francisco sidewalk
Many boomers on the streets. Quit reading garbage like Business Insider.
Approximately .0018% of the population in America are homeless.
Correction: .0018. Skip the % sign.
44 y/o non-homeowner here. I can confirm.
What is this nonsense? The people that you speak of between 17 and 45 have more money than they know what to do with! These are the people who drove up the prices of house and durable goods. My seven children are all in that age group. They are all richer than I am (not that I am poor) and they all own very nice houses.
Why stop at seven? After all, there is nothing at all egomaniacal or irresponsible or profane about progenating as though you were trying to win blue ribbon in a fecundity contest. Nothing. at. all.
You sound like great fun at parties.
C’mon – like you’ve ever been to a party to even have an idea about such things.
btfp, i’m all in .
One just needs to know how to read those tea leaves!
Gold understands.
One place the Sailors aren’t spending is in the classic car and motorcycle segment. I chart Craigslist and follow Bring a Trailer. The market has gone soft. The sales are slowing as the Sellers are clinging to the pandemic crazy pricing with buyers increasingly unwilling to bid up. This shows in the rising number of ” No Sales ” or ” Bid To”. The ” No Reserve ” listings have grown and some of them have recently sold at strikingly low numbers. In 2020-2022 the crazy buyers with their pockets full of PPP cash decided they wanted to be a classic car owner and fooled themselves into thinking it was a solid investment. This created a whole new segment of collectables that prior to 2019 were just old clunkers but then BANG a large swath of clean used cars or motorcycles over night became a Collectable. The cute little early 70s Honda CT70 is a darling to bike collectors as many baby boomers had one in their youth. The prices skyrocketed to an average of about $6,000-$7,000 with a special one owned by John Wayne selling for $29,000! The average price has declined in the last year to $4,000-$5000. The most shocking example sold last Wednesday @ $1600. These are the automatic model, the manual clutch “H” model sells for a bit more. The Dangerous At Any Speed Honda three wheelers were not looked at as collectable till the Sailors started buying. As I ramble my point is the bloom is off the rose.
I never understood why people today would pay a gazillion dollars for a beat-up motorcycle like the 1968 model I rode in the 1970s. But they do!
For me it is because my mother would never let me have one. Jokes on her now!
Wolf/MJ – the frequency of the point where some ‘old tat’ (UK idiom) magically transforms into a ‘valuable antique’ in the mind of a delusion-prone market has always fascinated me…
may we all find a better day.
Wolf – just guessing, but a CB350/450? (…don’t see you on a 2T, for some reason…). -best!
may we all find a better day.
1968 CB450, drum brakes front and back. I thought it was hot. Glad I survived this phase of my life.
The TTS — or as we called it at the time, the Münch Mammut — was my dream (every guy’s dream?). I was just a poor guy, who’d worked in construction all summer and bought a used somewhat banged-up bike with the proceeds. Worked as security guard on weekends during the year. The Mammut was possibly the first superbike ever, and not for poor guys. Too bad the company didn’t survive.
Friedl built some wild ‘n exotic stuff with that ohc NSU auto engine and lots of ‘elektron’. (…still highly-collectible, at least for now…).
may we all find a better day.
Classic cars are selling extremely well for very high prices on BAT.
I agree. BAT is the top of the market. What I am seeing is a distinct slow down and a rise in no sales. I looks like we may be at a tipping point. We certainly are with RVs Motorcycles, Boats and other toys.
The drunks are all at Mecum. Watched a few segments on Motortrend TV as a cure for insomnia. Some pretty insane behavior on the buyer’s part…..
BaT Auction Results: November 2023
A 2019 Porsche 935 sold for $1,626,000 in one of 54 BaT Premium auctions in November. Our sale rate for the month was 76% across 3,387 vehicle listings, including 1,363 that were offered without reserve.
How Mecum and Barret Jackson will survive with BaT growing quickly is a big question. I love BaT and sell my restos using the site. My results have exceeded my expectations. Mecum and BJ look like Montgomery Ward and Sears in the early days of the bricks and mortar demise. I just look at the trends and if you strip out the No Reserve from yesterdays results12/01/23 sold units on BaT it comes up with 32 sold and 28 bid to or 32 sellers not getting it. That’s close to 50% The stubborn sellers will wish they took the high bids. On 12/04/2022 the solds were 25 and bid to 9, big difference. The company is requiring more and more No Reserve listings and I don’t blame them. There market share is thru the roof! You go BaT!
Yes, I agree that ‘collector’ mkt is softening. I am not sure what that means to other than car collectors. I watch the auctions and things are slowing.
The 2022 911 GT3 Touring that I recently commented on is still for sale; $296k. Been listed for 16 days at the local Porsche shop. MSRP was $213.4
Just listed a few days ago, is a virtually new (100 miles) 2023 Cayman GT4 with the 4.0 litre normally aspirated flat-six and a 6-Speed manual. Asking price is $150k. MSRP was $119.2K. My guess is that it will sell soon.
My friend has a 1956 Ford sedan and a 1965 Corvair convertible for sale at an auction house in Houston. They have been sitting all summer. I’ll bet he takes a 50% haircut on those nicely restored cars.
A Ferrari F355 sold for $90k yesterday on BaT. Exact same car sold in April on BaT for $73.5k and had service in there interval that cost less than the difference. I don’t see a slow down. Maybe it depends on the generation of cars you’re looking at. I bought two model year 2000 cars overseas this year and will import when they turn 25 years of age. I’m an older millennial and 90s cars are it for me. It’s a generational thing like boomers and muscle cars and gen X and 80s cars. I expect my cars to have a hard time selling in 30 years from now as current kids won’t care for them, but that’s not why I bought…they are for me and resale value doesn’t matter.
It is a tale of two buying groups. The first is the wealthy or big pension retiree or anyone with wealth. The second is the Nouveau riche. Formerly paycheck to paycheck type that may have had a landscaping, drywall, used car dealership, nail salon, or any small successful business that over night received 4+4mos payroll free courtesy of the grand father of drunkenness Uncle Sam. The first have the wealth to buy most anything and like you just want it for themselves not to resell. The wealthy seem to be quite complacent with their financial situation and my also feel buying a Ford GT for 1.5m is a form of diversification. The Nouveau riche who never have entered the classic market was over night rich and stuck in their home with nowhere they could spend this pile of cash so they bought toys and included in that was classics. Problem is the ford GT was nowhere near 50k or even 30k as not every business got 100k +. That’s when a nice Rabbit GTI suddenly became worth a small fortune. Fast forward to today. that previously rich person is now having to live within the limits of their income which has risen faster than inflation. Still addicted to big spending and out of PPP cash and no way to refi the home again and they want to go to Disneyland for Christmas so something has to go. I look for the same classics that appeared over night to return to their rightful prices and soon. The wealthy will not have or want to sell as a group but the Nouveau riche will run for the exit all at the same time.
Fool me once, ah ah we won’ t get fooled again!
Spending probably won’t slow down from here and deals will keep getting better for durable goods. Didn’t see anything I wanted to purchase run out and come Spring guessing deep cuts to avoid holding all that inventory. Honestly seems like black Friday is year round these days. Not everyone teleworks but those that do gets hundreds of dollars a month of extra disposable income. I fill up my RAV4 once a month on average and not a hybrid. Oil get changed about once a year now and tires last almost a decade. My extra money mostly goes into tbills or dumplings. Even offsetting some of my property tax with 0% interest CC that has cash bonus so hundreds more there.
Wow! That is optimistic, and I can’t argue with it from what I am seeing.
So, the Fed will remain on hold and say they are watching the data. We will watch jobs and CPI for further clues as to whether the rally continues in December before year end tax selling likely causes a pull back or pause.
Then it’s inflation and jobs until all eyes turn to March and the Fed…
The Ides of March? Et tu JP?
What are YOU talking about?
IMHO…all of the salary & stock increases that have the “wealth effect” that
FED mystros have continuously promoted to increase the velocity of money
are keeping the party going because many folks don’t realize one simple clear fact…..the US DOLLar is losing value. Better buy gold! or silver.
Those drunken sailors must be on a different ship than I am.
Yeah — the Mary Celeste.
The Going Mary!
I feel that! But, spend some time in some tech or finance discussion forums and you may be shocked what kind of money people make in different fields and geographical locations. 5-6yrs ago while waiting in line for my visa to do hands on training work for our sister company in the US I sat there listening to people in front of me declare their salaries and most were around 200K/yr.. in tech, finance and one was a chef lol. Nowadays I sometimes come across people earning 300k-500k, again in tech, finance, some are self employed some are “consultants” but I really don’t know what kind of work that is lok.. I used to feel like I’m in the crappy boat spewing black smoke trying to keep up with the luxury yacht, but these days it feels like it’s sprung a few leaks and just might not make it to Port anymore 😆
Median Income in the US for Individuals is around $40k currently so half earn less than that. The high end is a small percentage.
Whether they have enough spending power to float the economy while the rest just ‘keep the boat afloat’ remains to be seen.
I think I am in the up shjt creek without a paddle boat
Rising incomes means robust demand and probably more prices increases. So inflation may find a second act just when we all think it’s over. That sounds more plausible than the soft landing talk.
These statistics describe a huge sector of the economy. I think it paints a rosy picture of an imaginery creature. If you take out the top 5% and divide the remainder into winners and losers, what kind of a world is described? I believe that a huge slice of Americans are not doing well, but they are lumped in with the billionaires, so they become invisible to somebody looking at the world with statistics.
Things are getting pretty exuberant and bubbly out there.
Everyone’s back on the rug, so to speak. But it doesn’t look like Powell is going to be the one to pull it.
Everything seems like a big pump and dump. Remember, most of the big buys are not long term investors. There are so much algo trading now that these positions can be week long.
No one really knows what will happen.
Amen
«Everything seems like a big pump and dump.»
And asset stripping. A traditional right-winger some years ago understood well the story of our times:
http://nymag.com/news/politics/conservatives-david-frum-2011-11/index4.html
“It’s fine to be unconcerned that the rich are getting richer, but blind to deny that middle-class wages have stagnated or worse over the past dozen years. In the aftershock of 2008, large numbers of Americans feel exploited and abused. Rather than workable solutions, my party is offering low taxes for the currently rich and high spending for the currently old, to be followed by who-knows-what and who-the-hell-cares. This isn’t conservativism; it’s a going-out-of-business sale for the baby-boom generation.”
Quite a few people on Wall Street, K Street, the Business Roundtable are getting very rich taking their cuts of that sale.
Salaries & hourly wages have gone up. People who are locked into their 3% mortgages now have even more money to spend. People who continue to work from home have more money to spend.
People who have low wage jobs, even with raises and who rent are still between a rock and a hard place.
Wolf, did you know about;
https://www.businessinsider.com/jpmorgan-jamie-dimon-risk-resilient-economy-recession-consumption-drunken-sailor-2023-9
I thought you’d a TM on that. ;)
Yes, this was in September. Clearly Dimon is a regular reader of WOLF STREET, like secretly when he sits on the john.
I do my best thinking in the shower and on the toilet (not necessarily in that order).
If the spending is so strong how come inflation is dropping so fast?
1. Inflation dropped because energy prices plunged from their huge spike, and because durable goods prices are dropping off their huge spike that had been inspired by the shortages during covid — used cars, electronics, appliances, etc. are actually getting less expensive that they were during the era of shortages. These goods are working off their price spikes. And those sharp price declines have pushed down overall inflation.
2. In terms of services, which is 65% of consumer spending, inflation is alive and well. The Core services CPI is running at 5.5%.
https://wolfstreet.com/2023/11/14/beneath-the-skin-of-cpi-inflation/
3. Spending growth is not “so strong.” It’s I would say “normal,” which is surprising because it’s “normal” despite the tightening cycle and the much higher interest rates that were supposed to slow down consumer spending to flat or decline.
I saw some garbage article on Market Insider saying that ING Economics expects six – SIX – rate cuts next year, and how consumer spending is at an all time low. I guess they forgot to read the part where this was the Black Friday with the largest spending ever.
It’s pure gaslighting. It’s like the people who continually lie to you to the point where you start to question whether they’re actually right.
They’re trying to force the Fed to pivot based on their expectations of a pivot.
I think the Dow Jones hit its highest high ever yesterday.
S&P is making me happy. 🎉
Not yet. But not far off.
The Dow’s closing high was 36,799.65 on Jan. 4, 2022. Its intraday high was 36,952.65.
On Friday, it closed at 36,245 and the intraday high was 36,264.85
Even crypto is edging back up. Gross.
To me it feels like the Nikkei right before it crashed. Everything was great, and then it wasn’t.
“Of the total amount of consumer spending, 65% goes to services. ”
Is there a further breakdown of this spending? I.e. the % that went to rent vs travel vs etc etc.
Your first chart (inflation adjusted) looks a lot like the top line in the fourth chart here (not inflation adjusted).
I keep hearing you say inflation adjusted spending is holding up and Mish saying it is flat or decreasing. It would nice to know which is correct.
If you like reading Mish’s stuff, read it, don’t drag it into here.
This data is from the BEA itself. Mish is fabricating stuff?
Other places show credit card use exploding, and charge offs rising. You’re the only one saying credit card use is fine. It would be nice to know who is right.
The internet is stuffed with clickbait BS for morons. If you like to wallow in this stuff, do it in the privacy of your own home, but don’t drag this BS into here. I’m tired of having to deal with every BS that’s out there. It’s not my job to clean up the internet.
READ THIS ALL THE WAY THROUGH:
https://wolfstreet.com/2023/11/09/credit-cards-the-big-payment-method-balances-burden-delinquencies-available-credit-how-are-our-drunken-sailors-holding-up/
Spending is a derivative of higher incomes which will drop like a rock when incomes wane. ie; the potential, not so soft landing that is more likely than the soft landing scenario.
I know that Wolf thinks that the drop in the interest rate structure is cyclical. I tend to think that it is more indicative of the onset of a recession.
Incomes won’t wane as long as the top 10% feel “rich” from their inflated bitcoins, stonks, houses, and whatever else.
Either the Fed reins in speculation and takes the froth out of the asset markets, or inflation continues at 5-6% per year for the indefinite future.
Yes, incomes are up. My question is how much of this income is coming from the government, either directly (state or federal employee) or indirectly (federal funding or government/military contract).
This matters with respect to debt and deficits.
My take;
The Fed is not going to lower rates, period. The Fed is forcing the f&%kers in CONgress to get their fiscal house in order. If they want to spend more, then they need to raise taxes. If they won’t, then the Fed will continue to raise rates. The Fed has no choice, and even then CONgress could still destroy the currency. No surprise, cryptos and PMs continue to skyrocket. Talent and capital looking for a place to hide from the idiocracy.
RTGDFA.
Under the subheading: “Where does all this money come from? Record incomes.” Second chart from the bottom, where it says this:
“Personal income from all sources, adjusted for inflation, but without transfer payments from the government – so this is income from wages, interest, dividends, rental properties, farm income, small-business income, etc., but without Social Security benefits, unemployment insurance, VA benefits, etc. – jumped by 0.3% for the month by 2.3% year-over-year (adjusted for inflation).
“This means that consumers have out-earned inflation by a fairly wide margin, and that’s where this spending growth comes from.
“This income growth is a function of rising employment, rising wages…”
AND THEN LOOK AT THE CHART (second chart from the bottom).
For me it feels like this is the first time being locked into a union contract is actually hurting us more than helping. We’re in our final year of our 4 year term and throughout the pandemic we were locked into 3% raises, which was nowhere near anything needed to keep up with inflation. My line of work used to be a very in demand and high paying skillset for blue collar work, but I feel like we got handicapped; we’ll see how contract negotiations go in June, I would like to see us catch up with the rest of society but I’m not holding my breath. Might end up switching companies if the outcome isn’t in our favor.