{"id":179,"date":"2023-05-23T15:23:29","date_gmt":"2023-05-23T15:23:29","guid":{"rendered":"https:\/\/powerhedgeglobal.com\/?p=179"},"modified":"2023-05-23T15:23:29","modified_gmt":"2023-05-23T15:23:29","slug":"the-u-s-consumer-continues-to-get-crushed","status":"publish","type":"post","link":"https:\/\/powerhedgeglobal.com\/index.php\/2023\/05\/23\/the-u-s-consumer-continues-to-get-crushed\/","title":{"rendered":"The U.S. Consumer Continues To Get Crushed"},"content":{"rendered":"\n

In multiple previous posts on this blog, I have shown evidence that the American consumer is in dire straits. This is at least partly due to inflation, which has been running at more than 4% for two years now:<\/p>\n\n\n\n

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Source: Trading Economics<\/figcaption><\/figure>\n\n\n\n

This would not be a problem if wage growth was keeping up with the rapidly-rising cost of living. However, this is not the case as shown by the Federal Reserve data:<\/p>\n\n\n\n

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Source: Federal Reserve Bank of St. Louis<\/figcaption><\/figure>\n\n\n\n

As we can clearly see, real wages have generally been falling since the middle of 2020, although we have seen a very slight improvement over the past two quarters. This explains why Americans seem to be complaining less about high fuel costs. After all, as I explained<\/a> a few weeks ago, falling crude oil and natural gas prices have been the biggest reason behind the falling headline inflation that has occurred since the start of the year. This is clearly shown here, as the core consumer price index, which excludes food and energy prices, has not shown the same decline that we have seen in the headline numbers:<\/p>\n\n\n\n

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Source: Federal Reserve Bank of St. Louis<\/figcaption><\/figure>\n\n\n\n

Thus, the only conclusion that we can derive from this is that consumers are being financially stretched in a serious way. This is something that investors need to consider when determining where to put their money, as it is much easier for consumers to cut back on discretionary spending than on necessities such as food and energy.<\/p>\n\n\n\n

Rising Consumer Debt<\/h2>\n\n\n\n

There have been a few ways in which consumers have responded to the rising prices and stagnant real wages. After all, American consumers do not want to give up their “toys” and luxuries unless they are left with no choice. One of the ways in which Americans have been trying to maintain their lifestyles is by spending down their personal savings, which were accumulated as a result of various government handouts and stimulus packages during the COVID-19 pandemic. The Federal Reserve currently puts Americans’ combined personal household savings balances at $1.0019 trillion, which is lower than the $1.3723 trillion that Americans had saved back in December 2021:<\/p>\n\n\n\n

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Source: Federal Reserve Bank of St. Louis<\/figcaption><\/figure>\n\n\n\n

Admittedly, we have seen the numbers start to improve since the middle of last year. That was, not coincidentally, around the same time that crude oil prices started to decline, which took some pressure off when someone fills up their car. However, despite this improvement, American savings balances are still lower than they were in the years preceding the pandemic. In fact, in March 2018, which is the lowest level for personal savings in the past five years excluding the inflationary period of 2022, American personal savings were at $1.1053 trillion. As the prices of most goods and services were significantly lower around that time, we can conclude that real personal savings were much higher relative to today than the data states (the above data is not adjusted for inflation).<\/p>\n\n\n\n

Another way in which consumers have attempted to maintain their lifestyles in the face of rising prices and stagnant wages is by going further and further into debt. At the end of March 2023, total consumer debt passed<\/a> $17 trillion for the first time in history.<\/p>\n\n\n\n

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Source: Schiff Gold<\/figcaption><\/figure>\n\n\n\n

This represents a $2.9 trillion increase since 2019 despite the fact that revolving credit card balances dropped substantially during the pandemic. It also represents a break in the usual pattern, which is that revolving debt typically declines during the first quarter as consumers pay down the credit card balances that they accumulated during their holiday spending sprees. This is, therefore, a clear sign that consumers are hurting since it likely indicates that they are actually going into debt to purchase necessities, as opposed to luxuries.<\/p>\n\n\n\n

Consumer-Focused Companies Reporting Weakness<\/h2>\n\n\n\n

Further evidence that consumers are going into debt just to pay for necessities comes from none other than Scott Feiler, a consumer-focused trader at Goldman Sachs. Mr. Feiler reports<\/a> that four companies missed expectations recently and cited weakness in consumer spending.<\/p>\n\n\n\n

From Mr. Feiler’s report:<\/p>\n\n\n\n