THE MORNING RANT - “Surreally Good” Economy: Incomes Are Falling, Prices Are Rising, Sales Volumes Are Declining, and Consumer Delinquencies Are Increasing

It is not my intent to resurrect Monty’s DOOM format in today’s post, nor is this a prediction of a recession or other economic turmoil. However, there are some strong signals that consumers cannot keep up with inflation and therefore have been forced to reduce the actual volume of goods they are purchasing.

Most economic reporting from the legacy media giddily reports increases in consumer spending as proof that the economy is roaring, but if spending is increasing by an amount that is less than the actual inflation rate, then there is a net reduction in actual products being sold.

Before I get into the meat of today’s rant, here is an example of the elite media shamelessly spinning that current economic data is “surreally good,” with Christiane Amanpour and Paul Krugman puzzling about the “disconnect” among people who don’t appreciate this great economy.

The economy is not surreally good, nor is the economic data. The Census Bureau just released some information this week which contradicts the fraudulently rosy statistics that the Labor and Commerce Departments have been pushing out.

U.S. Incomes Fall for Third Straight Year [WSJ – 9/12/2023]

Surging inflation gobbled up household income gains last year, making 2022 the third straight year in which Americans saw their living standards eroded by rising prices and pandemic disruptions.

Americans’ inflation-adjusted median household income fell to $74,580 in 2022, declining 2.3% from the 2021 estimate of $76,330, the Census Bureau said Tuesday. The amount has dropped 4.7% since its peak in 2019.

Hmmm, median household income peaked in 2019. Who was President then? And now, adjusted for inflation it’s persistently decreasing under President Biden.

While the following headline follows the cliché of ”World Ends, Women and Children Hit Hardest,” the story itself is an indictment of how destructive Biden’s inflation is to those living payday to payday.

America's Poverty Rate Soared Last Year; Children Were Among the Worst Hit [CBS – 9/12/2023]

The surge in poverty is "stunning," Sharon Parrott, president of the Center on Budget and Policy Priorities, said in a statement.

The rise in poverty amounts to an increase of 15.3 million people around the U.S. living in poverty, according to the left-leaning think tank.

That is 15.3 million people who might disagree with Paul Krugman.

The Supplemental Poverty Measure (SPM), which measures whether people have enough resources to cover their needs, was 12.4% for U.S. households in 2022, an increase of 4.6 percentage points from a year earlier, the Census said on Tuesday.

The child poverty rate, as measured by the SPM, jumped from a historic low of 5.2% in 2021 to 12.4% in 2022, the Census said. That's the largest change in child poverty since the Census began tracking the SPM in 2009, Census officials said.

With consumers unable to keep up with rising prices, they are cutting back on their purchases, resulting in fewer actual product units being transacted in many cases, even though inflation is still pushing the total price tag higher.

For example, Kraft Heinz is selling 7% less total product, even though its actual revenue is up due to inflation.

Kraft Heinz Sales Miss Estimates As Higher Prices Hit Demand [Reuters – 8/02/2023]

Kraft Heinz's product prices rose 11 percentage points in the second quarter ended July 1, driving a 7 percentage point decline in volumes. In the prior quarter, volumes had fallen 5.3 percentage points year on year.

Of note in that quote about Kraft Heinz, they have raised prices by 11% over the past year. The politically-motivated prevaricators at the Bureau of Labor Statistics claim that the inflation rate is under 4%.

Procter & Gamble is also seeing a decline in total sales volume…

Procter & Gamble Sales Rise Slightly, Fueled By Higher Prices [CNBC – 7/28/2023]

For roughly two years, P&G has been raising prices on its products to mitigate higher commodity costs. Yet customers haven’t been as willing to stick with P&G’s brands, leading to five consecutive quarters of volume declines.

In another recent story in a trade publication about P&G’s sales volume decline, it notes that “The prices of Pampers and Gillette were also up the last two quarters and are 10% more year over year.” That is 10% real-world inflation, which is triple the phony inflation rate being published by the Department of Labor.

One more…

General Mills Warns Against Promotions to Boost Declining Volumes [Food Navigator – 9/08/2023]

General Mills, Conagra, McCormick and many other CPG companies all reported strong organic net sales gains during their most recently reported quarterly earnings this summer, but almost all this was driven by multiple rounds of price increases over the past year that masked unusual declines in volume during the same period.

With consumers facing a loss of purchasing power and making fewer purchases by volume, every supplier and vendor involved in manufacturing those consumer goods and bringing them to market will also see a loss in sales volume too, an effect that ripples through the economy, which would explain the crash in cardboard box sales:

Worst Cardboard-Box Recession Since 2008 Could Be A Sign Of Broader Economic Weakness [Business Insider – 7/26/2023]

Cardboard-box sales have seen the biggest contraction since the Great Recession of 2008-2009.

Packaging Corp. of America just reported an almost 10% year-on-year slump in second-quarter shipments.

Cardboard, often overlooked, can be a reliable economic indicator given its key role in e-commerce and the shipping of goods.

Unsurprisingly, trucking freight volume is down 9% year over year because there are fewer products being shipped.

Truck Freight Volume & Spending Decline by Sharpest Amount Since Early COVID-19 Pandemic [Monitor Daily – 8/02/2023]

Truck freight volume and spending in Q2/23 declined by the highest levels since the early days of the COVID-19 pandemic, according to the latest U.S. Bank Freight Payment Index. Spending by shippers dropped 10.9% in the quarter compared with Q2/22, while shipment volume dropped 9%.

Maybe everything has just bottomed out. Maybe trucking and cardboard and diapers and all the other products that have seen unit declines are about to start seeing volume increases again. Maybe we’re about to enter an economic rebound that is as rosy as Paul Krugman’s make-believe world.

But where is the money going to come from? Credit cards and auto loan delinquencies have surged and continue to rise rapidly. Take a look at this chart:

Again, I’m not predicting a formal recession (which this administration would never declare anyhow) but consumer spending behavior is certainly indicating that an economic contraction of some sort is already under way.

[buck.throckmorton at protonmail dot com]

posted by Buck Throckmorton at 11:00 AM

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