USA – What has happened on households’ consumption?

Households’ consumption has been particularly weak during the first five months of this year. I have already written on this issue (here, here and there) but the real question is to better understand consumption behavior. It is important for the US business cycle but also for the global economic momentum.
The observation is that during the first three-month of 2014, personal consumption expenditures were up by a mere 1% (annual rate) and that for the second quarter the carryover growth was just at 1.2% at the end of May. This is clearly weaker than what was seen in 2012 and 2013 (see the first chart here)
The four charts below show the level of Personal Consumption Expenditures and its quarterly average (carryover for Q2 2014) and its decomposition by types of expenditures. Continue reading

US – Three Charts on Consumption Expenditures – A complement

As I was at the airport yesterday to write my last post on US consumption (here), I wasn’t able to add charts. This post is just an addendum with three graphs on consumers’ behavior.
As I mentioned here, it is important to highlight this behavior as the GDP downward revision came mainly from households’ consumption (see here my post on GDP revision)
The first chart shows the quarterly change of consumption expenditures. For the second quarter, this year, this is carry over growth at the end of May. Continue reading

In May, US households consumption dropped

In May, US households consumption dropped by -0.1% after -0.2% in April. Carry over growth for the second quarter is just 1.2% at the end of May. This figure must be compared to the meager 1% of the first quarter (with a contribution of 0.7% to GDP quarterly growth). Yesterday I mentioned that May figures would be important after the downward revision of Q1 GDP growth (see my post this morning)
Technically consumption growth could be positive for the second quarter but if the momentum seen in April and May is still there in June then Q3 consumption growth could be close to 0.(*) Continue reading

USA – Two charts to highlight the new GDP growth estimate

GDP growth was deeply revised downward for the first quarter. The first estimate at the end of April was +0.1% (annual rate). One month later it was revised downward at -1%. For the third estimate the figure is at -2.9%. Such a large adjustment is rarely seen.
Carry over growth for 2014 at the end of the first quarter is just +0.4% now. It implies that 2014 forecasts will be dramatically changed. With the same scenario, for the three remaining quarters, 2014 GDP growth drops from 2.1% initially to 1.6%. The recovery does not look the same with such figures.
The first chart helps to see the deep drop of the first quarter of this year. Is it a break or a temporary movement? Continue reading

France – Housing Starts are back to 1998 level – Housing crisis

The chart below shows housing starts in France since the beginning of 1995. The sum over 12 months is at 312 000 in May 2014 and can be compared to the level seen at the end of 1998.
This chart shows the housing problem in France. After a strong period in 2003 – 2007 and robust but unsustainable tax incentive period in 2010/2011, housing starts are back to their long-term trend (between 300 000 and 350 000 per year). This has to be compared to French population. Between January 1995 and May 2014 it has grown from 59 281 000 to 65 906 000. Between 1990 and 2010 the households’ number went from 21 942 000 to 27 715 000.
With these figures in mind, are you surprised by the housing crisis in France? Too many people, too many households for the number of new houses.
The target of 500 000 that was announced by the former Housing Ministry, Cécile Duflot, in 2013 is still too far from being reached. Continue reading

Japan – The negative impact of the higher VAT rate on sales can still be seen in May

The increase of the VAT rate on April the 1st was an important event in Japan but also for the world economy. The success or failure of the Abenomics was partly dependent on the impact of this increase on Japanese consumers’ behavior. We now have figures from department stores’ sales in May.
One month ago I did a first evaluation of the higher VAT rate on sales (here in French for department stores and here in English for retail sales). This post is an update.
In April department stores’ sales dropped dramatically after the VAT rate hike. March figures were strong in anticipation of this increase.
This dynamics was the same than in 1997 during the previous VAT increase.
Is there a difference in May? Continue reading