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Monday, January 30, 2012

Marketplace Gets It Wrong

I was listening to marketplace, and they noted the good news that incomes rose in December rose at the fastest rate in months, and that people saved more too.

They said that this is good, but what it really means is that consumer spending fell in December:

U.S. consumer spending was flat in December as households put the largest rise in income in nine months into their savings, potentially signaling slower consumption early in 2012.

It was the weakest reading on spending since June, the Commerce Department said on Monday, and it followed two tepid gains in October and November.

Still, economists were cautiously optimistic that rising wages as labor markets improve will keep demand supported.

"I do believe there is some underlying trend that gives us some reason to feel a little bit better about what lies ahead regarding spending, and the main reason is the labor market," said Anthony Karydakis, chief economist at Commerzbank in New York.

U.S. economic growth quickened in the fourth quarter and hiring picked up, but activity is expected to soften early this year. Federal Reserve Chairman Ben Bernanke said last week that the central bank was considering a further easing of monetary policy to support growth.
Reuters gets it. This is not good news.

This is deleveraging in  a depressed economy. 

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