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Lombardi Publishing Corporation, a 28-year-old consumer publisher that has served over one million customers in 141 countries, is warning that recent economic data, including increased consumer spending, higher personal debt levels, and a decrease in savings, point to weak growth in coming quarters.“All winter long, Wall Street was telling anyone willing to listen that the abysmal economic data was a result of the cold weather,” says economist and lead contributor Michael Lombardi. “It didn’t even matter if a company’s sales had anything to do with the seasons; management blamed the weather.”
According to Lombardi, Wall Street assured investors that consistent earnings and revenue growth would return with a vengeance once spring arrived. Unfortunately, sustained economic growth has not accompanied the warmer weather.
On the surface, March economic data showed promise, with consumer spending rising a seasonally adjusted 0.9%—the fastest pace since August 2008. Economists had predicted a 0.6% rise. (Source: “Personal Income and Outlays, March 2014,” U.S. Bureau of Economic Analysis web site; www.bea.gov/newsreleases/national/pi/pinewsrelease.htm, last accessed May 22, 2014)
“Unfortunately, the 0.9% increase in consumer spending comes at a cost,” Lombardi adds. “Consumers also increased their borrowing by the biggest margin in more than a year; consumer borrowing increased $17.5 billion in March, up from $13.0 billion in February. By the end of the first quarter, U.S. households were in debt to the tune of $11.65 trillion. To put that into perspective, that’s larger than the GDP of any country or region in the world, save for the U.S. and European Union.” (Source: “Consumer Credit – March 2014,” U.S. Federal Reserve web site, May 7, 2014; www.federalreserve.gov/releases/g19/current/g19.pdf.)
Increased borrowing usually translates into a decrease in savings. According to the Federal Reserve, the personal savings rate is at an anemic 3.8% of personal income. In March 2009, it was at six percent—that’s a four-year absolute drop of 2.2% and relative decline of 36%, and a far cry from the 13% savings rate in March 1974. (Source: “Personal Savings Rate,” Federal Reserve Bank of St. Louis Economic Research web site; http://research.stlouisfed.org/fred2/series/PSAVERT, last accessed May 22, 2014.)
“The spending euphoria on Wall Street was short-lived when it was reported that U.S. retail sales in April barely moved; edging up just 0.1%. Core retail sales, which strip out automobiles, gas, building materials, and food services, actually fell 0.1%,” Lombardi observes. “This is a more telling number, since it actually takes into account products consumers actually spend money on.” (Source: “Advance Monthly Sales for Retail and Food Services, April 2014”, U.S. Census Bureau web site, May 13, 2014; www.census.gov/retail/marts/www/marts_current.pdf.)
“The warmer weather might have encouraged people to make purchases in March that they delayed during the harsh winter, but the so-called economic rebound may have been a one-month blip,” Lombardi concludes. “That’s not the best sign for a sustained economic recovery; it’s more of a roadmap for disaster.”
Founded in 1986, Lombardi Publishing Corporation, which has served over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more information on Lombardi Publishing Corporation, visit www.LombardiPublishing.com.
Contact Info:
Name: Wendy Potter
Email: Send Email
Organization: Lombardi Publishing Corporation
Address: 350 5th Avenue, 59th Floor, New York, NY 10118
Phone: 905 856 2022
Website: http://www.lombardipublishing.com/
Release ID: 45668
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