Merryn's Blog

The US consumer is still down in the dumps – and that's bad news for the rest of us

The world still depends on the US consumer for growth. But with American jobs at risk and the housing market still in turmoil, global economic recovery is still a long way off.

Thursday 14 January was a depressing day for anyone under the impression that the global economy was slowly returning to 'normal'.

Why? Because it was the day that the US retail sales numbers for December came out. And they showed that sales for the month were 0.3% down on sales in November. That's even if you exclude the likes of cars and construction materials (which no one really wants much of these days). Sales for the full year were down 6.2% on 2008.

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This was all widely reported as a 'surprise'. But it shouldn't have been much of one. Americans, like the rest of us, shop when they feel secure in their finances. Right now they don't feel remotely secure. Their jobs are still very much at risk. Note that even on official numbers the number of jobs in the economy took another dive in December.

Worse, the housing market (the thing that once made them feel very secure indeed) isn't improving in a hurry. As Graham Turner of GFC Economics points out, most indicators suggest that, despite quantitative easing, despite the Home Affordable Modification Program (HAMP, which is supposed to force lenders to cut the payments of delinquent borrowers to keep them out of official default), and despite the giving of whopping tax credits to new buyers, delinquencies and foreclosures are still rising fast.

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According to figures from RealtyTrac, foreclosure filings for December hit nearly 350,000, only just below their high in July of around 360,000. Given that December is generally a "slow month for foreclosures" there really is no way to spin that into good news. Especially given that, according to RealtyTrac chief James Saccacio, the numbers would be far worse were it not for "legislative and industry related delays in processing delinquent loans". No wonder consumer confidence surveys show that sentiment is not much better now than it was at the worst point (so far) of the crisis.

Economists across the world can and do come up with mountains of data supposedly supporting global economic recovery. But however much one might wish for somewhere in the east to take up the slack, the world still depends on just one thing for growth the health of the US consumer. And the health of the US consumer depends on two other things his job security and the price of his house. Both are letting him down and showing every sign of continuing to do so.

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