Fisher Investments Editorial Staff
Media Hype/Myths

A Halloween Headline Tour

By, 10/31/2011

Confused on Consumer Spending

Consumer spending is undoubtedly an important metric—contributing around 70% of US GDP. But we are constantly puzzled by how the media covers it.

With each release, it seems the data provide a different slant. In the not-so-distant past, we were told zombie consumers (boo!) wouldn’t spend. Or “the consumer” (whoever that one fellow is) is dead. Or they’re overleveraged. Or they were overleveraged, but now they’re deleveraging, so they won’t spend. Confusingly, the slant seems to shift with each and every release, but it never says “the 300-million-plus American consumers spent more last month in aggregate, and we figure on balance they know their individual situations better than we journalists and pundits think.”

So when the BEA reported September consumer spending rose +0.6% while disposable personal incomes rose +0.1% and consumer spending rose in Q3’s GDP report, we weren’t surprised to see another take: Now consumers are “eating their seed corn,” and it’s supposedly a “red flag” implying they won’t spend moving forward. 

By definition, if disposable income rises less than consumer spending, the savings rate falls—which has led to these claims consumers are tapping their savings. Maybe some are. But the fact is, the savings rate has been elevated the past few years, so that it dipped recently isn’t exactly shocking. Moreover, the savings rate is a highly flawed economic statistic—omitting investing activity, retirement account contributions and more. Ultimately, take the data for what they are: Consumers spent more in another sign the consumer isn’t dead (or a zombie).


In the wake of the new European plan for its debt problems announced before dawn Thursday, many are bemoaning its lack of details. And it’s true—there are plenty of details to be hashed out in the coming weeks, and some could give rise to more political gamesmanship.

But this seems mostly like an expectations problem to us. After all, the meetings held were between finance ministers and eurozone leaders—politicians! We strongly doubt a team of accountants, financial analysts and the like were heavily engaged in the meetings, punching away on calculators and spreadsheets and debating the finer points of a plan. The goal of this meeting was a framework to facilitate discussion of details. That happened.

We’re certainly not suggesting the plan will be perfect, complete or a cure-all even when the details are included. But to criticize Angela Merkel and Nicolas Sarkozy for not figuring out the precise numbers and tactics involved with the plan is to overlook who politicians are and aren’t. These are people who won national popularity contests. Not people who won the Nobel Prize in Mathematics.

Seven Billion Strong . . . and Malthus Is Still Wrong

According to the United Nations, October 31, 2011 is not only Halloween, but Seven Billion Day—when its forecasts show the human population is due to exceed the number.

This harkens us back to ghost stories from 18th century English philosopher Thomas Malthus, who famously thought the world’s population growth would outstrip man’s ability to support the population with food and the like. His dire view of the world suggested no improvements in agricultural yields would come. Humans couldn’t cope. And the death rate should be allowed (or . . . gasp . . . encouraged) to increase while lowering the birth rate. Scary stuff! We won’t delve deeply into the theory here, except to say Malthus overlooked a few not-so-small things: Technology, capitalism, human creativity and productivity. (There are more.)

So here we are . . . over two hundred years and billions of people later, and our ability to feed them all is much better, not worse. And there’s no sign that’s going to change soon. Were he alive today, we figure Malthus would be pretty darn shocked over 300 million people live in America today—and the First Lady of the US is more concerned with obesity than famine. So on Monday, when you look at carved pumpkins (food) or hand out candy (free food), remember an old Brit who was famously, epically wrong.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.


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