Philly Fed President Plosser: Consumer Spending, Exports Are Cause for Optimism

By: Paul_L_Kasriel

Really?
Light motor vehicle sales down for six consecutive months (see Chart 1) is cause for consumer spending optimism? Bed Bath & Beyond, Best Buy, Circuit City, Sears Holdings, Home Depot and West Marine recently issuing profit warnings are a cause for consumer spending optimism?

Chart 1

Downward trending year-over-year changes in nominal same-store national chain retail sales (see Chart 2) are a cause for consumer spending optimism?

Chart 2

Downward trending consumer sentiment (see Chart 3) is a cause for consumer spending optimism?

Chart 3

Near record household debt service burdens (see Chart 4) with billions of dollars of adjustable rate mortgages due to rest higher in the coming 12 months are a cause for consumer spending optimism?

Chart 4

Falling house prices and slowing active mortgage equity withdrawal (see Chart 5) are a cause for consumer optimism?

Chart 5

Near record low household liquidity (see Chart 6) at a time of near record household leverage (see Chart 7) is a cause for consumer spending optimism?

Chart 6

Chart 7

If these are causes for optimism, President Plosser, I would hate to see pessimism!

By Paul L. Kasriel
The Northern Trust Company
Economic Research Department - Daily Global Commentary

Copyright © 2007 Paul Kasriel
Paul joined the economic research unit of The Northern Trust Company in 1986 as Vice President and Economist, being named Senior Vice President and Director of Economic Research in 2000. His economic and interest rate forecasts are used both internally and by clients. The accuracy of the Economic Research Department's forecasts has consistently been highly-ranked in the Blue Chip survey of about 50 forecasters over the years. To that point, Paul received the prestigious 2006 Lawrence R. Klein Award for having the most accurate economic forecast among the Blue Chip survey participants for the years 2002 through 2005.

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