Thursday, August 3, 2017

Société Générale's Albert Edwards Not His Usual Jolly Self: "The Last Time This Happened Was In January 2008"

From ZeroHedge:
Two days ago, we were the first to point out that in a striking case of data revisionism, the Bureau of Economic Analysis, in an attempt to retroactively boost GDP, revised historical personal incomes lower, while adjusting its estimates of personal spending much higher, resulting in a sharp decline in personal savings, which as a result, was slashed from 5.5% according to the pre-revised data, to just 3.8%, in one excel calculation wiping out 30% of America's "savings", and cutting them by a quarter trillion dollars in the process, from $791 billion to $546 billion, a level last seen just before the last US recession.

Today, SocGen's grouchy bear Albert Edwards, commented on this drastic revision which disclosed that contrary to previous conventional wisdom that US consumers had been hunkering down in recent years and saving up for a rainy day, the surge in spending in late 2016 may have been the only catalyst that prevented the US from collapsing into outright contraction. Edwards also reminds us that such a dramatic savings slump last occurred in 2007, just before all hell broke loose.
As Edwards writes, "very recent data confirms slumping household saving ratios in both the US and UK. This was last seen in 2007, just before the bursting debt bubble blew the global economy and financial system to smithereens. The Fed and BoE should surely hang their heads in shame having presided over yet another impending disaster. Why will politicians and the people tolerate this incompetence? Indeed they won’t."

Away from the US, Edwards also notes that the UK has also recently published some shockingly low household SR data, showing a slump in Q1 to only 1.9% (see chart) and adds that "actually the UK’s situation is worse than it looks relative to the US SR if you measure it on the same basis (see chart below). The US measures household income and savings net of depreciation ? mainly of the housing stock. If you add this back (as the UK does), the US household gross SR is some 3% higher!"
Needless to say, all of the above is an ill omen for the US, and global, economy. Here's why, in Edwards' own words, which largely echo what we said earlier in the week:

The US Bureau of Economic Analysis has this week undertaken some revisions of the US saving ratio (SR). Actually it has revised both income (downward) and expenditure (upward). And as the SR is the difference between these two very large numbers, it can be severely affected by small changes in income or spending. The new data shows the US SR actually declined from 6% to 4% through 2016 (see chart below) and undoubtedly stopped the US economy sliding into recession in the second half of last year as real household incomes suffered a severe squeeze due to rising headline CPI inflation....

Alphaville's Matthew Klein also picked up on the decline but he doesn't seem nearly as despondent/borderline suicidal:

Time to worry about the American consumer?
Two basic ways to spend more money: you can earn more and save the same, or you can earn the same and save less. Newly revised data from the Bureau of Economic Analysis show that American consumers have spent the past two years embracing option 2. The average American now saves about 35 per cent less than in 2015:...MUCH MORE