As Paul Krugman points out, all of the “economic growth” in the first quarter consisted of inventory build-up: consumers aren’t buying stuff as fast as factories are turning it out. Worse than that, purchases of goods actually fell; the “growth” was mostly in the imputed rental value of owner-occuped housing and in medical care.
But wait, it gets worse: consumers can’t even afford the amount of spending they’re now doing.
U.S. consumer borrowing jumped more than double the amount economists forecast in March, indicating a slowing economy is forcing Americans to accumulate credit-card and other forms of debt.
Consumer credit increased by $15.3 billion for the month to $2.56 trillion, the biggest monthly rise since November, the Federal Reserve said today in Washington. In February, credit rose by $6.5 billion, previously reported as an increase of $5.2 billion. The Fed’s report doesn’t cover borrowing secured by real estate, such as home-equity loans.
Consumers are turning to credit cards after banks tightened standards for home-equity loans and other borrowing. The March figures brought U.S. consumer borrowing in the first quarter to $34 billion, the most since the first three months of 2001, when the economy entered its last official recession.
And no, they really can’t afford it. They’re falling behind on their bills.
Overdue payments at the six largest U.S. credit-card lenders reached the highest since November 2004, according to data compiled by Bloomberg. An average of 4.11 percent of loans were at least 30 days late in February and March, according to reports filed by American Express Co., Bank of America Corp., Capital One Financial Corp., JPMorgan Chase & Co., Citigroup Inc. and Discover Financial Services.
So we have (1) measured economic growth (some of it fictitious imputed rents) not fast enough to keep up with the growth in the labor force plus normal productivity gains; (2) based on inventory build-up, which puts downward pressure on next quarter and the quarter after; (3) financed by unsustainable consumer debt, which puts more downward pressure on next quarter and the quarter after.
“Recession”? I think so.
h/t Peter Cohan