"M E W" is the acronym for Mortgage Equity Withdrawal--the money spent on stuff OTHER than the house, improvements to the house, and associated costs of obtaining the mortgage (points, real-estate fees, etc.)
Got it?
Good.
Well, maybe not-so-good--as MEW has been trending down, sharply, in the past couple of quarters.
The creator of the above graph admits that it is not necessarily precise--the calculations are based on 'pretty-close-to-reality' numbers, but some of the key component numbers are almost impossible to determine. However, the graph seems to comport with what we already know--it passes the 'smell test.'
It ain't good news, however.
HT: Calculated Risk
8 comments:
I haven't looked at this indicator for awhile...I guess I should.
You're right though, it's not good news.
Is it good news for a fiscal conservative?
JP, your question is vague.
What the MEW contraction means is a decrease (or at best a leveling) of consumer spending in the 12-24 month period (or maybe longer.)
What does "fiscal conservatism" have to do with that?
Would not a fiscal conservative prefer less consumer spending, more saving and less debt?
Yup.
As long as the MEW decline signifies increased savings and less debt, it's good.
Problem is--we don't know exactly what it signifies, other than less mortgage-equity-withdrawals.
We SUSPECT it will result in less spending.
Does not a decline in MEW usually result in less mortgage debt?
Generally, one expects that less MEW means less debt.
If you're going towards "less debt means a better balance sheet," you are correct.
It's also likely to mean less spending on goodies--which means that the GDP will slow down.
That's not bad in and of itself; but generally speaking, both Gummint and economists like to see growing GDP. Gummint for the obvious reason: more tax revenue. Economists (generally) because growing GDP means expanding activity--which is to say, non-deflationary trend.
Not linking spending, saving, and debt is not wise.
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