Americans Make More and Spend Less: Some Economic Numbers

A major industrial company files for bankruptcy, the economic date is so-so and the stock market soars. Go figure.

Thanks to the stimulus plan, disposable income was up 1.1% in April. If you take out the effects of the stimulus plan it was up 0.7%. Americans, however, decided not to part with the extra cash instead they stashed it away. The personal savings rate jumped to 5.7% which is a 14-year high. So much for stimulus stimulating consumption. [Reuters]

There was some “green shoots” news. The ISM survey for May came in at 42.8% versus 40.1% in April. Since any number below 50% represents contraction, I can hear you groaning about another second derivative the decay is slowing argument. This time there’s some actual real, positive growth embedded in the numbers. How often have we said that in the past nine months? Here it is. New orders came in at 51.1% versus 47.2%.

Here is a little more detail from MarketWatch on the numbers:

May new-orders index rose to 51.1% from 47.2% in April, the ISM’s data showed.

The production index increased in May to 46.0% from 40.4%.

The prices-paid index rose to 43.5% from 32.0%.

The inventories index fell to 32.9% in May from 33.6% in April.

There was no improvement in the job outlook. The employment index dropped to 34.3% from 34.4% in April.

China’s manufacturing index showed a third consecutive month of expansionary activity. The number for May was 53.1% . Likewise, India is holding up well with an index of 55.7% but the Eurozone is still the weak sister coming in at 40.7%. [NYT]

So, I guess there’s some reason for optimism in all of those numbers. I’m not sure it validates the rocket ride the equity markets are on but then again I’ve never understood those markets to begin with.

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About Tom Lindmark 401 Articles

I’m not sure that credentials mean much when it comes to writing about things but people seem to want to see them, so briefly here are mine. I have an undergraduate degree in economics from an undistinguished Midwestern university and masters in international business from an equally undistinguished Southwestern University. I spent a number of years working for large banks lending to lots of different industries. For the past few years, I’ve been engaged in real estate finance – primarily for commercial projects. Like a lot of other finance guys, I’m looking for a job at this point in time.

Given all of that, I suggest that you take what I write with the appropriate grain of salt. I try and figure out what’s behind the news but suspect that I’m often delusional. Nevertheless, I keep throwing things out there and occasionally it sticks. I do read the comments that readers leave and to the extent I can reply to them. I also reply to all emails so feel free to contact me if you want to discuss something at more length. Oh, I also have a very thick skin, so if you disagree feel free to say so.

Enjoy what I write and let me know when I’m off base – I probably won’t agree with you but don’t be shy.

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