Maxed Out Momma Says “Recession Time”

No, she didn’t say “recess time.” Unfortunately, the cards she’s reading point to a downturn in the economy -- i.e., one of those smiley faces with the frown.

As defined by Answers.com an economic recession is

...an extended decline in general business activity; typically two consecutive quarters of falling real gross national product.

For her stats, Momma turns to the Census Bureau Reports, published March 13th, listing ADVANCE MONTHLY SALES FOR RETAIL TRADE AND FOOD SERVICES. Jolly good reading if you can stand the details. I started to snooze after Table 1B, but the indefatigable maternally Maxed is made of sterner stuff. Thus, she managed to tweeze out these disturbing little nuggets:

• MoM adjusted total retail would have been negative except for the increase in gas sales.
  
• Grocery store receipts are negative YoY when adjusted for price increases.
  
• MoM adjusted for restaurants and bars is negative.
  
• YoY adjusted and non adjusted for restaurants is negative when price increases are taken into account.

Help, Starling! Throw me a rescue line here; I’m in over my head. What is a YoY when it’s up and dressed? Let's hope he notices and shows up with a few helpful terms in hand.

Meanwhile, Maxed Out Momma explains her contention that we’re declining and expands on her bad news:

Consumer credit from last week (Jan preliminary) showed moderate increases, no doubt because consumers were appalled by the credit card binge in November. The bottom line is that Q4 2006 total consumer debt rate of increase doubled from Q4 2005. Q4 2006 revolving credit (credit cards, basically) rate of increase nearly doubled from Q4 2005.

What we are seeing in consumer credit is the end of consumer spending financed by mortgage equity extraction (MEW). And what we are seeing in retail is that the consumer cannot borrow enough on credit cards to sustain spending increases.

Now these two reports make it clear that consumer spending will be decisively weak all this year, and that is because of the income distribution involved in those total wage increases reported so positively by the media. The problem is that the top echelon is getting nearly all of it, while the bottom echelon is getting less than enough to compensate for price increases.

The end result is that the housing problems have spread throughout the wider economy. In short, we are experiencing contraction not just in manufacturing, autos and housing, but in consumer spending. Very shortly we should see the four week moving average of initial unemployment claims move past the 350,000 mark.

All I can say is I’m glad the Baron trained me to pay off our credit cards every month or to go without. Actually, it didn't take much training -- I've seen what credit card debt does to people. In fact, that may be why answering machines were invented. Nope, the only risk I take is in tiny stock purchases. For fun. Like two dollars a share.

Meanwhile, our sometime-neighbor, who only visits here occasionally, has taken up permanent residence for awhile to do some clean-up on his property. His construction business further south is in the doldrums so he has time on his hands. In addition, he’s stuck with a high-end vacation home he can’t get rid of.

Well, that’s my anecdotal evidence for Maxed Out Momma’s contention about the housing part of this pattern.

What’s yours?

In the meantime, go over to her site just to read her other posts so you’ll know what not to invest in.

Makes for grim reading.


[Post ends here. It’s bad enough without laying it on any more thickly]