The Consumer: Isn’t Growth- Growth?- by NEIL SISKIND

The consumer confidence index show consumers feel “eh”.

Consumer spending is down in the last quarter.

The CPI print came in down.

Prices are up, per the PCE deflator index.

Interest rates are up, and headed higher.

Wages are stagnant.

How can business earning grow if consumers of their products are not growing? That makes no sense. If consumer will not spend “more” how can businesses pay employees “more”, or charge consumers “more”?

You may say, with tax cuts, businesses will still earn more. And that would be true. And stocks can still go up, based on that.

So, even without”real” or “organic” growth, stocks can go higher. But the stock market is not the economy.  Eventually, in a quarter or two- real, organic growth will matter.

You may also say that because of capex bonus depreciation, business spending will go higher, despite the consumer. This, however, may be untrue. If businesses that sell to consumers do not see growth out of the consumer, they will not make those investments just for tax purposes. Even businesses that sell to other businesses are selling to a customer that ultimately has to sell their respective products to a consumer.

The consumer being “ok” is not enough for “growth”. Businesses need “growth” or else stocks will not grow and/or overhead will be cut- leading to higher unemployment.

Businesses, by definition, can not show growth if consumer spending does not grow. Consumer spending will not grow if incomes do not grow.

Growth is growth. It’s either real or not.

Certain Wall Street analysts are calling for continued economic growth. I suppose they are focusing on tax cuts- and not on actual sales to actual people.

China is slowing, Europe is slowing, The U.K. is slowing. In the U.S., the most recent GDP print came in lower, and the U.S. consumer is weakening. So, growth from where? From whom? Every country is either raising interest rates (the U.S.), or wishing they could raise interest rates (Japan), or had planned to raise interest rates but now cannot (the U.K.), or plan to raise rates in the future (ECB), or are raising interest rates to deflate a real estate bubble (China). This sounds more like a global coordinated slowing- rather than global coordinated growth.


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