Hooray! Discretionary Services Spending Finally Back to 2007 Level

The current economic expansion is now the third-longest expansion in U.S. history. It's also extraordinarily weak. It took 10 years for consumer discretionary spending to reach the level hit in 2007.

Depth of Decline and Extent of Recovery

Liberty Street Economics, a publication of the New York Fed, has the details in its report on Discretionary Services Spending.

The above chart shows the extent of the decline in real per capita discretionary services expenditures from their previous peak—a zero value in the chart indicates that expenditures are equal to or above their previous peak. The chart shows the extraordinary decline of these expenditures—a drop of more than 8 percent at the trough of the Great Recession, compared with a 2 percent decrease in the previous recession.

Pace of Recovery

Having recently passed the eight-year anniversary of the trough of the Great Recession the current expansion has become the third-longest in U.S. economic history.

The following chart compares the pace of spending recover seen in the current expansion with the 1960s and 1990s expansions, which lasted longer than the current expansion, and the 1980s expansion, which lasted almost as long.

As of the second quarter of 2017, discretionary expenditures were only 8 percent above their level at the 2007-09 recession’s trough. In contrast, at this point in the other pictured expansions, expenditures were more than 20 percent above the level at each respective recession’s trough.

How Much Debt Did It Take?

Hooray, we finally made it. But how much debt did it take?

The above chart does not provide a perfect answer but it does suggest many consumers are leveraged to the hilt to maintain lifestyles they cannot afford.

Mike "Mish" Shedlock

Comments (12)
No. 1-12
Kreditanstalt
Kreditanstalt

How do you define an "economic expansion" without netting out the massive increases in the money & credit supply AND debt & leverage over the last decade? It sure doesn't seem like an "expansion" from down here on the ground. Perhaps this is an expansion in some kind of NOMINAL terms.In effect, aren't today's (unearned) living standards the same thing as a "misallocation of capital"?

Blacklisted
Blacklisted

Ever-increasing govt costs (taxes, health care, fees, etc.) insures more money is coming out of your pocket than is going in. However, as pathetically corrupt the US is, Europe and the rest of the world are worse, which is the main driver behind higher asset prices. As Europe and Japan implode over the next two years, expect stocks to unexpectedly rise much higher until the rising dollar and rates brings the dollar-based system to its knees.

FlyOver_Country
FlyOver_Country

Mish, can you give more detail into the March 2010 spike? At first glance it looks as if a huge amount of credit was created but from what I can find, it was a change in the accounting that caused the spike. From the H.8 release notes; 'As of the week ending March 31, 2010, domestically chartered banks and foreign-related institutions had consolidated onto their balance sheets the following assets and liabilities of off-balance-sheet vehicles, owing to the adoption of FASB's Financial Accounting Statements No. 166 (FAS 166), "Accounting for Transfers of Financial Assets," and No. 167 (FAS 167), "Amendments to FASB Interpretation No. 46(R)." Domestically chartered commercial banks consolidated $363.4 billion in assets and liabilities.'

shamrock
shamrock

That chart is absurd on it's face. If you take out that ridiculous spike then debt is actually still below the 2009 peak. So the answer is, it didn't take any debt.

surfaddict
surfaddict

Anecdotal yes: 2005-7 Drag racing events, were FULL, of entries, the pits were packed with people and cars. The grandstands were filled. Today, the same events> Epty grandstands, plenty of room in the pits, very low car counts.