US households worry about incomes

US incomes Feb11.pngThe fascinating chart above from Dave Rosenberg at Gluskin Sieff confirms the blog’s fears above the impact of today’s high oil prices on US consumer spending.
It shows that consumers in the world’s wealthiest econony have very low expectations for their real income. These are now at the 4th lowest level since the survey began. And all 3 previous troughs – in 1979-80, 1990, and 2008, coincided with spikes in the oil price. Today’s low expectations fit this trend.
Consumers have no real choice about their spend on gasoline and energy bills. And its only after these have been paid, that they decide whether they can afford the discretionary spending that drives chemical and polymer sales.
Of course, sentiment indicators, even well-established ones like this from the University of Michigan can be wrong. But it just adds to the blog’s sense of uncertainty about what is really happening to end-user demand, and to inventories down the value chain.

1 thought on “US households worry about incomes”

  1. Paul,
    What confuses me is that the big chemical companies are telling us that life is pretty good. During Q4 2010 earnings season some told analysts that they couldn’t make enough to supply the demand in the market. They say they have pricing power. Some are oversold and have put customers on allocation. Sure, it’s not across the board, but there’s enough of it going on that the overriding message appears to be that demand is somewhat strong, not pre-2008 strong, but strong (and, of course, not in all sectors). We’re also seeing chem railcar loadings moving upward.
    If chem company customers are buying chemicals, I would expect that they think they can sell whatever it is that they’re going to make with those chemicals. But at the other end of the chain, we’re seeing consumer sentiment in the tank. Disconnect? Is demand dissipating as we move further down the supply chain? Where are those chemicals going? Any idea?

Leave a Comment