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.

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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?

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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

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