It's That Time Again

 

It's that time of year again, when the shills experts pop up on bubblevision (and elsewhere) and start fantasizing talking about the return of the free-spending U.S. consumer. In "Retailers Should See Strong Back-to-School Season," CNBC details the "insights" of one such individual.

Craig Johnson, president of Customer Growth Partners, said Tuesday that he expects back-to-school spending to climb 6.2 percent to $467 billion between July and September from the prior year. If this proves correct, it would be the best back-to-school spending growth since 2006.

Johnson points to several reasons for his optimistic forecast. First, disposable personal income has been on the rise, up 3 percent from last year's level.

Er, sorry to interrupt, but what is he talking about? According to Bloomberg, year-on-year real (inflation-adjusted) disposable personal income is actually 0.6 percent, or one-fifth of what he says it is. Moreover, as the following chart shows, the trend has been deteriorating for months.

Well, maybe Mr. Johnson just made a little slip-up, and deserves a bit more rope room to make his case. Let's see what else he has to say on the subject.

Households also have healthier finances, according to Johnson. The 91 percent of the population that is employed has been cleaning up their debt loads, and household debt service ratios are down to 11.5 percent of income, according to the Federal Reserve. That's the lowest level since 1995.

Sorry to burst the retailing analyst's bubble, but one reason why household debt service ratios are so low is because interest rates have remained artificially depressed and many businesses are offering ultra-cheap financing to shift the autos and other goods piling up in showrooms and warehouses.

In fact, when it comes to how much debt Americans still have around their necks, things are as bad as ever if you compare the amount of debt outstanding to the size of the economy, like so:

OK, I'm a nice guy (really, I mean it), so I'm going to give our allegedly well-informed industry guru one last chance to redeem himself. Here's his third bull point.

Meanwhile, personal savings rates, which spiked to 8.2 percent two years ago during the recession, are returning to more normal levels, Johnson said. Right now, the rate is about 5 percent, which is just a touch above the historical 4 percent norm.

Well wide of the mark again, I'm afraid. When it comes to determining "normal levels" for savings rates, the idea is not just to include data from the past two decades or so, when attitudes about risk and credit were largely at reckless extremes. Rather, it makes sense to look at the longer-term picture. In that respect, savings rates are actually two percentage points below average.

So, given that all three of Mr. Johnson's reasons for being optimistic about the upcoming back-to-school season are, at best, misguided, and at worst, totally bogus, that probably means it's a great time to take the under

Indeed, given the ultra-strong performance of retailing shares in recent months, no doubt driven by the kind of magical thinking that got Mr. Johnson so excited, I expect there will be plenty of analysts and investors who will be "surprised" by how "unexpectedly bad" the retail sales data is by the time September rolls around.

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