The true state of the US economy.

[theDreamer]

12 hours ago, rick r said:

A lot of great insight in your post, and I don't want to go way off topic, but "the economy as it is", is... very strong?

 

Solid GDP growth, unemployment very low, asset prices at all time highs, discretionary spending robust and insensitive to inflation... The backdrop is super favorable to the leisure car market, I would say.

Everything else you say, I think you are 100% right. 

Edited 19 hours ago by theDreamer

[theDreamer]

The US GDP has been up and down over the last 10 quarters. It has been as low as -.6% and has high as 4.4%. That’s not “stable” in any economists view.

Unemployment figures from the government are not complete so therefore not accurate. They only show those who are actively looking for employment. Those figures do not take into account people with a part time job who are looking for more hours or a second job. These figures also do not show those whose household incomes are under $26,000 or the hundreds of thousands of homeless who want to work but cannot get a job due to their circumstances. So the US government says it’s around 4% and independent research says it is more like 24%.

Your statement; "discretionary spending robust and insensitive to inflation" is false. Discretionary spending is always sensitive to inflation more so for some than others. Yes, high income households (millions in assets) will be able to sustain their spending habits. However, the middle to lower income households (the majority of the country) will feel the pinch. They will slow their retail activity and be very selective with major purchases. The lowest income households get hit the hardest and are the ones who can least afford it.

Discretionary spending is slowing down. So much so that new car manufactures are extending lease and loan periods while offering incentives to move inventory. Same for furniture and major appliances.

You are seeing a lot of cars coming to market because many of those middle to low income people are selling off what they can do without to make sure they can afford what they truly need.

[Exarkun1178]

I view the health of the economy from my front door.  All of my cost of living expenses are up, Like, up up.  Grocery shopping (pre-pandemic was ~ $200 a week for a family of 5, now we average north of $500 (for less food)

My electrical expense has increased 90% pre covid.  I used to pay ~ $0.12 per KWh now I am $0.23 and it keep going up every 6 months.

My N.gas is up 40% for the same period.

My car insurance is up near 100%, despite driving less and no incidents or claims.

Gas has a lot of volatility, but has remained very high. 
 

My kids tuition has increased 1/3^rd since 2021.  The high school we are planning to send my daughter was at $10k a year for the last 15 years, now its $18k.  Its increased  +$8k over the last two years. 

 

I pay tariffs now for goods from Europe – never had to do this in the past…  Caterham related, I anticipate 12% on the car, =$12k.  I spend nearly $300 in tariffs just on the new gauge set I mistakenly ordered as an example.  

Life has become very expensive. 

 

Happily my income has also seen increases that have, so far, exceeded the cost of living. But this increase in income is tied to folks willing to pay +$100,000 for their own solar system…  as the federal incentives have, for the most part, expired, I expect demand to decrease significantly.  A year from now, we'll have yet even more cost of living increases and a softened income stream….

I want to stay positive and   believe the trade drama will…. eventually lead to significantly increased US based manufacturing, a strong robust job market across the middle class and increasing salaries. I know this is a major lift and will take time to ramp up, so I have tolerance for short term pain, but with the Iran stuff, I become more skeptical that we will realizes these fruits. 

With the mid terms a month away, with Iran and economic hurt, limited election integrate reforms,  there’s a good chance Congress, likely by design, will flip and the whole thing stalls.  When that happens the last year and a half will be wasted with no lasting effects.  We’ll go back to the status quo.
 

[theDreamer]

We are in a similar position here. The BIG difference is neither of us work, we're both retired. We each receive two small government pensions that increase slightly over time but does not meet inflation. I have to top that up by pulling funds from my retirement account. We pretty much break even at the end of each month. But the retirement account is disappearing faster than we projected way back when we first set things up. Our financial planner, like so many, looked mostly at the favorable factors and didn’t consider worse case scenarios.