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Thursday, September 3, 2015

The US Economy Is Not Awesome And It’s Not Decoupled - by David Stockman

What had the headline software giddy, of course, was the year over year comps, which were in double digits. Yet did the talking heads bother to note the deep hook in last summer’s data?
No they didn’t. Otherwise they might have seen that the two-year stack in July came in at a hardly fulsome 3.7% annual rate and that nominal private housing spending is still 7% below December 2007 and 43% below the early 2006 peak.
More importantly, they might have noticed that this is no longer your grandfather’s housing market. The US housing stock got way over-built during the Greenspan bubble and the incoming generation of home-buyers has gotten buried in $1.2 trillion of student debt.
So notwithstanding the mini-boom in multi-family apartment construction, the $380 billion annual rate of spending in July amounted to only 2.1% of GDP. That’s the same rock bottom ratio registered in July 2013, and is clear evidence that the housing needle has not really moved at all.