We had enough information this week from the US to further confirm that the economy is growing again.
But so far, the US consumer hasn’t been sighted, unlike in Australia where the June quarter’s national accounts revealed a very prominent role with household final consumption up 0.8% and adding 0.5% to growth in the quarter as the government stimulus spending splashed money around.
The lack of a leading role for the consumer so far in the tentative US recovery is no accident.
It’s a direct result of the reasons for the slump: too much debt, too much spent on housing and now too many job losses.
And, even if the August jobless figures improve (they are released overnight Friday in the US), there will be little way America’s consumers can rejoin the economy.
The weekly unemployment benefits data for the US showed an improvement: a fall of precisely 4,000 people.
The Obama Administration still is pumping in stimulus, export markets are slowing turning for the better, and US companies have slashed inventories, jobs and costs.
But no customers, and no sign of any upturn.
Already some US analysts are warning that the Thanksgiving-Christmas period is going to be tough, with reports that leading retailers are experiencing a surge in customers wanting to put goods on lay by (or layaway), and not buy them on credit cards.
That tells us that American consumers have little or no access to credit at the moment, or are maxed out on their cards, are worried about their jobs and their futures, or have lost their cards or credit limits have been cut.
Last Friday’s survey on consumer sentiment survey released by the University of Michigan and Reuters revealed a grim self portrait of the way consumers think about their present and future financial conditions.
Just 16% of consumers said their own finances had improved the smallest proportion in the survey’s history.
And only one in four expecting their incomes to grow in the coming year.
A record number of consumers report finding discounted prices everywhere they shop.
But the survey did show a small rise in the confidence level from the start of August, even though the final reading was the lowest since April.
How much of that was due to programs like the now ended Cash for Clunkers car package, which saw a surge in car sales last month and a lot of positive comment isn’t known.
As well, figures from the US Commerce Department confirm the bleak times for consumers.
The Cash for Clunkers program boosted consumer spending 0.2% in July, with increased spending on new motor vehicles accounting for the entire gain.
Total income of all American households was flat in July as stimulus payments from the government fade.
But private sector wages rose for the first time in a year, but are still down a nasty 7% over the year to July.
That’s a record fall, so it’s little wonder that US consumers aren’t spending; they only have enough money for the essentials.
And it was a similar story for personal income.
The US Commerce Department reported that personal income in July 2009 increased less than 0.1% from June.
Real and nominal personal consumption expenditures (PCE) rose 0.2%. (That means that inflation is not a threat in the US.)
Real disposable personal income (DPI) declined 0.1%, while nominal DPI decreased less than 0.1%.
The personal saving rate as a percentage of DPI was 4.2%. (Australia’s was at 4% in the June quarter.)
This confirms that US consumers are not getting any extra income, except from the stimulus spending.
Excluding the impact of those payments, the Department said: "Excluding these receipts, real DPI decreased less than 0.1 percent in July, following a decrease of 0.2 percent in June, and an increase of 0.1 percent in May".
Consumer spending, which accounts for about two-thirds of US economic activity, fell at a 1% annual rate in the second quarter after a 0.6% rise in the first quarter.
And Reuters and several other agencies have started reporting another problem for US consumers and retailers.
This is the changes to American credit card rules that will see credit limits cut by nervous card companies now subjected to greater controls on the way they offer their products.
Reuters says that millions of Americans have already seen their credit card limits shrink, and millions more face the same fate as lenders prepare for the tougher US consumer protection rules.
"Credit Suisse analyst Moshe Orenbuch estimated available credit card lines will be cut by about 20 percent, or $1.2 trillion, in coming months, and warned that "further cuts could result from the provisions of the new credit card law."
"Meredith Whitney, one of Wall Street’s best known and most bearish bank analysts, forecast that unused credit card lines will be cut by $2.7 trillion, or around 50 percent, by the end of 2010," Reuters reported.
If these cuts occur, that will further depress consumer credit, already running at the lowest levels for six years or more.
Credit card issuers have driven business growth by freebie offers with no annual fees and low interest rates and lenders would increase those charges if the clients were late in their payments or exceeded their credit limits.
But a new law, starting next February, forces credit card companies to warn customers about changes in contractual conditions, imposes more restrictions on increasing fees and raising interest rates.
Existing customers are already seeing their credit limits chopped anyway.
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