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

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.'

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.

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.

economic expansion supported entirely by QE + unnaturally low interest rates... so it's more of a 'mirage' than an expansion, as even the slightest move towards rate normalization will cause the entire 'expansion' to evaporate...

I do not know what to make of that spike.

I do not know what caused the spike but the level is certainly higher than before. It is possible people not paying credit card bills when they lost their job accounts for it. Another possibility - car loans.

Here you go Mish. If you have not seen this yet, I thought you would get a big kick out of it.
(In regards to your recent posts of how "inflation" is really stealing, and that deflation benefits most people.)

(Via Bloomberg) The IMF’s steering committee warned that global growth is at risk of faltering in coming years given uncomfortably low inflation and rising geopolitical risks, injecting a cautious note into an otherwise improving economic outlook.

“The recovery is not yet complete, with inflation below target in most advanced economies, and potential growth remains weak in many countries,” the International Monetary and Financial Committee said in a communique released Saturday in Washington.

“Near-term risks are broadly balanced, but there is no room for complacency because medium-term economic risks are tilted to the downside and geopolitical tensions are rising.” (read more)