Thursday, July 7, 2011

Discretionary spending tanked

Yet another indicator our economic mess goes much deeper than our politicians let on.

Liberty Street Economics, the New York Fed's blog, has a post detailing the weakness in personal consumption expenditures (PCE) for services in the most recent recession and recovery. This accompanying chart compares   current personal consumption spending to past recessions.

The chart helps visualize why so many storefronts have gone empty, why businesses stopped expanding, and why many businesses continue to cut back or close their doors. Demand for their services is simply not there.

This also suggests that blaming banks for not lending is a false argument for why recovery has lagged. Until strong consumer demand for their services return, business owners are smart not to incur more debt.

Evidence of a real recovery will continue to elude us until consumers have the means and the will to start spending again.

No comments:

Post a Comment