~ By Michael Lombardi, MBA
Look at any newspaper or watch any financial news channel and you will hear someone saying the U.S. economy is growing. To prove their point, they will refer to gross domestic product (GDP) figures and unemployment data.
Yes, the GDP numbers and the unemployment picture do look better, but our economy is still in very big trouble.
American consumers, who make up two-thirds of America's GDP, are refusing to spend more. In December, the biggest shopping month of the year, retail and food service sales in the U.S. economy declined one percent from the previous month. And in November, they only showed a menial increase of 0.4%. (Source: U.S. Census Bureau, January 14, 2015.) At the retail level, consumer demand is contracting.
This phenomena is confirmed when I look at inventory figures. In November, business inventories in the U.S. economy were up 4.4% from the same period a year ago—to $1.763 trillion, the highest amount since the Census Bureau started to track this data in 1992. (Source: U.S. Census Bureau, January 14, 2015.)
So we have a situation where inventories are growing at four times the rate retail sales are declining! How does that make sense for an economy that is supposed to be growing?
And despite all that noise about economic growth, the number of Americans using food stamps isn't declining. In October of 2014, there were 46.7 million Americans on food stamps—that's 46.7 million Americans having trouble putting food on their tables. (Source: U.S. Department of Agriculture, January 9, 2015.)
The number of Americans using food stamps has remained above 46 million since October of 2011. If the standard of living and the U.S. economy were actually improving, as portrayed in government data, the number of people on food stamps would be declining.
The "official" government employment numbers exclude people who have given up looking for work and people who have part-time positions because they can't get full-time positions. The percentage of people working in the U.S. has dropped to 63%—the lowest level since 1978, despite a booming U.S. population. That means 92 million Americans are not working.
When I look at all this, I continue with my stance that key stock market indices are running well ahead of reality. But that could be changing here in 2015, as the Dow Jones Industrial Average and the S&P 500 are both down for the year. Even the new trillion-dollar quantitative easing program announced yesterday by the European Central Bank (ECB) wasn't enough to push the markets to solid new highs.
For key stock indices to go higher, you need something to back them up...like consumer spending rising and corporate revenue and earnings both growing. Continued money printing alone won't cut it.