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Posts Tagged ‘consumer spending’

Spending Going Up Despite Higher Oil Prices

April 29, 2012 Comments off

Gallup Self-reported consumer spending is near post-crisis highs. It’s incredible really.

Oil prices are quite high, and consumer spending is holding up.

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Credit Card Swipe fee reductions to add significantly to U.S. economy

July 12, 2011 2 comments

If you haven’t heard the news, credit card swipe fees are about to be reduced by the government.  I think these fees are close to being criminal, so any reduction in these fees is good news.

The amounts that will be added back into the economy by this reduction in fees will be rather large.   It will end up being noticable in GDP over the next 20 years.  In fact, we’ll get close to an extra year of growth in the next 20 years just by reducing these fees.

It’s a bold, but provable claim.

The current rate is about $.44 per transaction or $16bn a year in revenue.  Just using simple math, we can figure out how much more money will be injected into the economy by the reduction in fees.

The proposed fees are $.20 from the fed, but they might go down too. The debate isn’t over.  $.12 has also been floated.

At the top is a quick table.  It’s remarkable just how large this boost will be.

My first thought is the impact will be even greater due to where the savings will accrue.  It’s going to go to lower income consumers, and small retail business owners.

Lower income consumers do much of their shopping at Walmart and small retail establishments.

Walmart won’t have as much savings as most business, but their fees will be reduced. Walmart agressivly negotiates all of its contracts, and swipe fees will be part of this.  They are rather cutthroat about passing savings onto consumers, so there will be very slight, but meaningful in aggregate, reductions in costs for Walmart customers.

I don’t expect prices to go down much in smaller retail establishments.  But the owners of these small business just got a decent boost to their profits.  The owners of small retail establishments are not rich – they will increase their spending.  I’d say it’s reasonable to expect mulitpliers on the order of a payroll tax cut for these fees.

If the multiplier is 1.3, we’re going to see close to a .1% increase in GDP due to lower swipe fees.

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Austerity, Boshterity*! You are Messing up my Spending Data!

January 11, 2011 Comments off

3 Day Average spending from Gallup.com for the Holiday Spending Season

I like to track the Gallup personal spending numbers.  These numbers are self-reported spending per day, and in the past they have served to show consumer spending increases or decreases.  For example, back in 2007, the numbers were over 100 per day.

In the last few years, these numbers have been much, much lower than they were back in 2007.  Since the Great Recession began, the numbers have been consistently below $70.

I am no longer as convinced as I once had been about their long term comparibility. The word of 2010 was “Austerity” according to Merriam-Webster.  Prior to last year, I only used the word “austere” when I wanted to impress people with my fancy wine describing skils – “I find most old world wines more…austere…than new world wines”.

I think this new found appreciation for austerity in the U.S. is skewing the self-reported nature of these numbers.  People do not want to admit – even to themselves – how much they are spending.  I could be wrong, this is pure armchair psychology, a speculation on an unprovable.

However, I still look at the Gallup Numbers.  According to these numbers, spending for Christmas 2010 was very similar Christmas 2009.  The peak number was higher, and the numbers through the major spending weeks had a higher average, but there was 16 days fromDec 3rd to Dec 20th where spending was much worse.   The week before Christmas saw a significant increase over 2009.

My next big look is how the January spending numbers will stack up.  I think that the U.S. is in a recovery, so I want to see if the traditional January drop off in spending is as profound as it has been for the last few years.  I hope spending does not drop dramatically, but only time will tell.

*Smausterity was a bit too humorous for AM writing, went with Boshterity.

The U.S. recovery accelerates

December 20, 2010 Comments off

The U.S. consumer is beginning to feel as though they will not lose their job next week, and that the cuts are done.

As a result, spending is probably up this month.  I am actually seeing long lines in stores when I shop – very long lines.

Economists expect consumer spending to be good for November -and I do too.  I no longer think the Gallup polls are good indications of spending.  My expectation is that due to society wide changes, frugality is “in” and appearing to spend less is part of the new normal.   I would tell people I am spending less this year, when by any objective assessment I am clearly spending more.

Even the Gallup polls show parity with last year – but as far as I can tell the Gallup information is equal weighted, not spending weighted.   Upper income spending drives most of the U.S. Economy.  My expectation is that high-income spending is up dramatically over last year for the Holiday Season.

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