Can A Negative Savings Rate Be Sustained?
From Bloomberg:
U.S. Personal Spending Rises 0.4%; Inflation Quickens
U.S. Personal Spending Rises 0.4%; Inflation Quickens
Consumer spending in the U.S. rose 0.4 percent in June, the smallest gain this year as higher gasoline prices left Americans with less to outlay on other goods. Incomes also increased.
The rise in spending, which accounts for more than two- thirds of the economy, followed a 0.6 percent May gain, the Commerce Department said today in Washington. The Federal Reserve's preferred gauge of inflation increased 2.4 percent from the same month last year, the most since September 2002.
...
The report's price gauge tied to spending patterns and excluding food and energy costs, the Fed's preferred measure, rose 0.2 percent for a third month in June.
In the second quarter, the government's core personal consumption expenditures index rose at an annual rate of 2.9 percent, the fastest since a 3.2 percent pace in the third quarter of 1994, the Commerce Department's July 28 report on gross domestic product showed.
...
Today's report showed that the savings rate rose to minus 1.5 percent from minus 1.6 percent in May. A negative rate suggests consumers are dipping into savings to maintain spending.
14 Comments:
The report can be found here:
PERSONAL INCOME AND OUTLAYS: JUNE 2006
We're at 15 consecutive months of negative personal savings..
grim
From Marketwatch:
Core inflation rising at 11-year high in June
U.S. core consumer inflation matched an 11-year high in June, keeping the pressure on the Federal Reserve to fight inflation, the Commerce Department reported Tuesday.
The core personal consumption expenditure price index (excluding food and energy) increased 0.2% for the third straight month in June, and has risen 2.4% in the past 12 months, matching the largest year-over-year gain since April 1995.
ISM numbers came in above consensus, as well as above last month. The prices paid index was up as well, a signal that inflation pressures remain elevated.
grim
Construction spending up 0.3% versus 0.1% expected. Last month revised upward to 0% from -0.4%.
Slowdown? Where?
grim
2 questions:
Where can I find interest rates futures (i.e. the probability of a rate increase next week)?
With the entire yield curve below the Fed funds rate, what practical impact will raising interest rates really have?
Does Commerce consider retirement savings (401 [k]s) as part of the savings rate?
If not, the numbers might be slightly skewed, since a lot of people funnel into their retirement accounts money that might otherwise be saved as some unrestricted form of liquid capital.
EG: I put 15% of my gross into a corporate 401 (k), which leaves relatively little to save. Nevertheless, I keep a six month cushion for expenses, but am not, as such, "saving" for anything, other than the unexpected.
-Jamey
Grim-
Are those residential construction numbers only? If it's all commercial and residential, that's easier to understand.
JM
Construction numbers I posted were the combined figures..
Construction Spending in U.S. Increased 0.3% in June
.S. construction spending increased in June by the most in three months as companies built more factories and offices at the same time homebuilding slowed.
The 0.3 percent rise during the month followed no change in May, previously reported as a 0.4 percent decline, the Commerce Department said today in Washington.
...
Private non-residential construction rose 2.7 percent in June and was up 22 percent from the same month last year. Companies also spent more on hotels, power plants and communications projects.
Private residential construction spending fell 1 percent in June, the third straight decline, as higher interest rates curbed purchases. Homebuilding decreased at an annual rate of 6.3 percent in the second quarter, the most in six years, the government's gross domestic product report showed on July 28.
Anonymous said...
2 questions:
Where can I find interest rates futures (i.e. the probability of a rate increase next week)?
With the entire yield curve below the Fed funds rate, what practical impact will raising interest rates really have?
8/01/2006 10:22:27 AM
To get live quotes, you need a trading platform which costs $$$$. The best gratis method I use is the Bloomberg Website. Go to NEWS then choose MARKETS then choose BONDS and there will be constant stories that are dynamically updated quoting recent [within an hour usually] data.
example: http://tinyurl.com/knqsb
answer to #2 - Without providing a long winded response, the quick and dirty is that Fed Funds increases bank's raw material cost [money to lend] - it feeds through the whole system. Only refined and established credits use the curve. The bulk of commerce is conducted on an accounts payable/receivable basis.
The Cleveland Fed site does a great job of illustrating changes in Fed Funds Futures due to current events.
Fed Funds Rate Predictions
The only issue is that it is update more frequently..
grim
correction:
The only issue is that it is not updated frequently..
Exactly what skep-tic said. Dont believe the govt BS about inflation in check - they just show those #s to keep COLA payments lower. Tell me one thing that is cheaper now than it was 3 years ago? Inflation is through the roof, and it is 100% because the govt is printing money faster than GDP is expanding (this is 100% of the cause of inflation - Fed tightening BS is just that).
ok fellas, I have said this once before, keep stealth infaltion in mind when you look at numbers.
A huge factor that gets overlooked.
SAS
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