We previously noted that the personal savings rate has continued to decline, and in the latest month it tumbled from 3.2% to 2.9%, the lowest since November 2007, which as a reminder is one month before the recession started.
This incidentally explains the surge in credit card usages we recently noted. As a reminder, the 13-week annualized credit card balances in the U.S. have gone completely vertical in the last few months of 2017, a troubling sign and yet another confirmation that US household savings are almost gone, forcing Americans to resort to savings.
All of which leads us to Gluskin-Sheff’s David Rosenberg’s comments yesterday.
Rosie asked – rhetorically:
What does it mean when we have booming employment and massive tax cuts… and household buying plans take a deep dive?
This is what that dive looks like – Conference Board ‘Plans To Buy’ Homes, Autos, and Appliance have all plunged in the last three months…
And simplifying the noise in that chart, we see the picture loud and clear…
And Rosie’s answer is ominously clear:
Here’s what it means — the consumer is debt-strapped and tapped out. Pent-up demand is a relic of the past.
All of which confirms that the US consumer is now effectively tapped out. And the last few times that consumer confidence had spiked on the heels of personal credit expansion hype (and a collapse in the savings rate), things did not end well for stocks…
What happens next?
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