Economics, Pethokoukis

More weak economic news shows U.S. recovery in danger


Real disposable income — “the amount of income at the disposal of households after accounting for inflation and taxes,” as Reuters puts it — fell 0.3% in August after ticking up 0.1% in July. That was the first decline since November.

Bad news. But even worse news is that this measure of income has gone absolutely nowhere during this recovery, up just 0.3% since June 2009.

So who’s ready for the fiscal cliff? Not most Americans. This from RDQ Economics: “With tax increases approaching, households (especially those without holdings of equities) are not in a strong position to absorb the tax increases slated to kick in on January 1st 2013 unless the Congress and the President take action on the fiscal cliff. ”

Also out this morning was an ugly Chicago Purchasing Managers report. Again RDQ:

The Chicago purchasing managers’ index was weaker than forecasts declining to 49.7 in September from 53.0 in August.  The new orders index fell to 47.4 in September from 54.8 in August, the employment index weakened to 52.0 from 57.1, and the production index dropped two points to 55.4.

BOTTOM LINE:  A rather disappointing report on Midwest manufacturing conditions as the Chicago purchasing managers’ index fell below the breakeven 50 level for the first time since September 2009.  Moreover, the decline in the index was driven by a weak reading on new orders and slower employment growth.  To some extent this index may be catching up with other regional manufacturing surveys, which have shown weaker conditions on manufacturing growth than this survey in recent months.  However, with the decline in the index driven primarily by orders and employment, it is hard to be optimistic about a recovery in the national ISM in September and we look for that index to slip to 49.0 on Monday from 49.6 in August.  This report had something of a stagflationary feel to it as prices paid rose to 63.2, which was the highest reading since April.


9 thoughts on “More weak economic news shows U.S. recovery in danger

  1. I do agree with you, here. The consumer has been a force in this recovery, but with the DPI falling, that is in serious jeopardy, especially with higher taxes due over the next two years. Fortunately, has been muted thus far, but I do not expect that trend to last next year as oil prices rise further and food spikes.

  2. “stagflation”? try FREE FALL DEFLATION! Next stop is DEPRESSION…then, DEFAULT! Are you going to buy back Berneke’s bonds? We are on a no exit highway to hell.

  3. The stock market is a crap shoot; cd / mm acount rates are abysmal; future taxes are questionable; and healthcare insurance fees will probably go up thanks to Obamacare – the only thing a consumer has to do is pay off debt and not purhcase anything. I’m in my peak employment earnings years and I’m in a financial holding pattern. I k ow that I am not alone n this. That’s the USA’s problem – fear, not hope.

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