The big news that set off yesterday’s rush to buy stocks came from the USA, where it was reported that the US recession is off. That’s right, according to the feds the US economy grew at a 2.5% rate in the last quarter. Details to follow.
Says The Financial Times…the growth was “led by an encouraging jump in consumption.”
What is encouraging about that?
The report tells us that “consumption rose 2.4% at an annualized rate, adding 1.7 percentage points to growth.”
We also learn that “personal disposable income fell by 1.7%, annualized.”
How were people able to spend more when their disposable income and wealth were both going down? Good question. The answer is in the report too. The savings rate went down from 5.1% to 4.1%.
Now, let’s see… Households lost $800 billion of housing value over the last 12 months — or about $8,000 per family. Their incomes fell too. And the largest group of them is facing retirement sometime in the next 15 years, totally unprepared, financially.
So…you tell me that the economy is picking up speed thanks to their increased spending? And you tell me too that consumer sentiment — how consumers see their own situation — is at its lowest point in 40 years.
Our forecast: US recession ahead…if not in 2011, in 2012.