by The University of Michigan consumer confidence index fell to 82.8 in May, from 88.3 in April. More importantly, the current conditions index slumped to 90.8, from 97.2 and the expectations index declined to 77.6, from 82.7. Hard data also questions the strength of the recovery. April retail sales were flat, with clothing down 5.1 percent, general merchandise store sales fell 4.9 percent, leisure and sporting goods were down 3.6 percent, with food and drink services up just by 3 percent. United States industrial production was also almost flat in April, rising just 0.4 percent month on month in April, pushed by a 4 percent slump in motor vehicle production. You may think this is not that bad until you see that industrial capacity utilization came in at 74.7 percent
Topics:
Daniel Lacalle considers the following as important: 6b) Mises.org, Featured, newsletter
This could be interesting, too:
Nachrichten Ticker - www.finanzen.ch writes Krypto-Ausblick 2025: Stehen Bitcoin, Ethereum & Co. vor einem Boom oder Einbruch?
Connor O'Keeffe writes The Establishment’s “Principles” Are Fake
Per Bylund writes Bitcoiners’ Guide to Austrian Economics
Ron Paul writes What Are We Doing in Syria?
| The University of Michigan consumer confidence index fell to 82.8 in May, from 88.3 in April. More importantly, the current conditions index slumped to 90.8, from 97.2 and the expectations index declined to 77.6, from 82.7.
Hard data also questions the strength of the recovery. April retail sales were flat, with clothing down 5.1 percent, general merchandise store sales fell 4.9 percent, leisure and sporting goods were down 3.6 percent, with food and drink services up just by 3 percent. United States industrial production was also almost flat in April, rising just 0.4 percent month on month in April, pushed by a 4 percent slump in motor vehicle production. You may think this is not that bad until you see that industrial capacity utilization came in at 74.7 percent in April, significantly below the prepandemic levels. Employment also questions the “strong recovery” thesis. Nonfarm employment is still down 8.2 million, or 5.4 percent, from prepandemic levels, yet gross domestic product is likely to show a full recovery in the second quarter. These figures are important because they come after trillions of dollars of so-called stimulus and because the entire thesis of the V-shaped recovery comes from a view that consumption is going to soar. Reality shows otherwise. In fact, reality shows that retail sales showed an artificial bump due to the wrongly called stimulus checks, only to return to stagnation. |
|
| The rise in inflation further calls into question the idea of a consumption boom, certainly for the middle class. Why? If we look at the 4.2 percent rise in the Consumer Price Index in April, it includes a 25 percent increase in energy, a 12 percent increase in utility prices, a 5.6 percent increase in transportation services, a 2.2 percent in medical services, etc. As consumers perceive a higher rise in prices, especially in those essential goods and services that we purchase every day, consumption decisions become more prudent and propensity to save rises. This is something that we have seen in numerous countries. In Japan, years of “official” messages about the risk of deflation clashed with citizens’ perception of cost of living, and tendency to save increased, rightly so. Citizens are not stupid, and you can tell them that there is no inflation or that it is transitory, but they feel the rise in cost of living and react accordingly.
Two things should concern us. First, the weakness of the recovery in the middle of the largest fiscal and monetary stimulus seen in decades, and second, the short and diminishing effect of these programs. A $2 trillion stimulus package creates a very short-term impact that lasts less than five months. |
I recently had a discussion with Judy Shelton, and she stated that the recovery would be stronger without stimulus. She is probably right.
Neo-Keynesians will likely say that if the above figures persist, the solution is more stimulus, but it is not. More money to government programs means slower growth and weaker recoveries.
The American consumer is not happy. They do not see the official optimism about the job market or the macro figures, and the current sugar high is likely to lead to an abrupt sugar low.
You Might Also Like
Weekly SNB Sight Deposits and Speculative Positions: Inflation is there, CHF must Rise
2021-05-31
Update May 31 2021: SNB intervening. Sight Deposits have risen by +0.9 bn CHF, this means that the SNB is intervening and buying Euros and Dollars.
Gamestop, Market Distortions, and Manipulations
2021-01-29
In the wake of the extreme price explosion in GameStop stock, driven in large part by the subreddit WallStreetBets on Reddit, there is naturally a great deal of talk about “market manipulation” and related concerns. Many people are saying that hedge funds manipulate markets.
Hayek, Friedman, Buchanan: The Villains of “Neoliberalism”
2021-01-09
Wendy Brown, a well-known political theorist who teaches at UC Berkeley, does not like Friedrich Hayek very much. She in part blames him and others as well, including Milton Friedman and James Buchanan, for policies that have led to the bad state of the world in general and America in particular today.
The Problem with Mandatory “Socially Responsible Investing”
2020-12-28
The term environmental social governance (ESG) investing is relatively new. As described in Forbes, [An] approach that is slowly on the rise is ESG activism, where an activist fund will take a position in the security of a company with the aim of campaigning to make its business better in terms of governance, less environmentally unfriendly and more socially responsible.
Feudalism and Cronyism in Machiavelli’s Italy
2020-12-23
Although liberty is a recurring concern in Machiavelli’s writings, there is no consensus regarding either the definition of the concept or its relevance for his overall political thought.
The American Revolution Was a Culture War
2020-12-22
Two hundred and forty-seven years ago this month, a group of American opponents of the Crown’s tax policy donned disguises and set about methodically destroying a shipment of tea imported into Boston by the East India Company. The vandals trespassed on privately owned ships in Boston Harbor and threw the tea into the ocean.
The US Money Supply Was up 37 Percent in November
2020-12-17
In November, money supply growth rate was essentially unchanged from October and remains near September’s all-time high. The stabilization we find in money-supply growth in recent months comes after eight months of record-breaking growth in the US which came in the wake of unprecedented quantitative easing, central bank asset purchases, and various stimulus packages.
The Skyscraper Curse: And How Austrian Economists Predicted Every Major Economic Crisis of the Last Century
2020-12-12
The Skyscraper Curse: And How Austrian Economists Predicted Every Major Economic Crisis of the Last Centuryby Mark ThorntonAuburn, Ala.: Ludwig von Mises Institute, 2018. Michael Novak ([email protected]) is a Ph.D. student in entrepreneurship at Oklahoma State University. He also holds an MBA from the University of Wisconsin-Whitewater.
Tags: Featured,newsletter