Juggling Dynamite

Denmark raised its retirement age last week to 70 for Danes born in 1971 or later. Workers currently become eligible for the Danish equivalent of Social Security at age 67, which will go up steadily in the coming years. See: The New Retirement Age in Denmark is 70:

…There aren’t politically easy answers, and people in physically demanding professions might struggle to work additional years in those same jobs. Yet there appears to be a cross-party agreement in Copenhagen that leaving the retirement age unchanged is reckless.

…As a reminder, the U.S. system of Social Security is projected to be insolvent in 2033, at which point the checks to retirees will suddenly be 21% smaller. Nobody wants this to happen, but nobody wants to take the heat for proposing real reform, so the U.S. keeps barreling toward a cliff while pretending not to notice.

With life expectancies of 80 years or more, more of this is inevitable in other developed economies. In the United States, full government-sponsored retirement benefits are currently available at age 66, whereas in Canada, they are available at age 65. Germany, under Angela Merkel, went the wrong direction, lowering the retirement age to 63 from 67 for some workers. France raised its retirement age to 64 from 62 under a reform pushed through by President Emmanuel Macron.

During the pandemic, near-zero interest rates and government subsidies enabled excess consumption beyond sustainable means. That inflated the prices of most goods and assets while exacerbating wealth gaps between the old and young, as well as between the top ten percent and the rest. We are now in a mean reversion phase, and the downward momentum is contagious across the economy.

The RV market has been in recession over the last two years, with prices of RVs plummeting by as much as 25%. This RV market collapse is a leading indicator for the US economy and suggests an economic slowdown is underway. The last time the RV market crashed like this was before the 2008 economic crash. Sales declined and prices dropped. Today, Many RVs cost as much as $100k to $150k, and some people who bought during the pandemic can no longer afford them. Publicly traded RV companies like Winnebago are showing the slowdown in their stock price, down as much as 60% the last three years. Here is a direct video link.

According to the University of Michigan’s preliminary May survey, the U.S. Consumer Sentiment Index fell to 50.8, down from 52.2 in April. This marked the second-lowest reading in the survey’s nearly 75-year history, surpassed only by June 2022.

The decline is attributed to heightened concerns over inflation and the economic impact of President Trump’s trade policies. Notably, 75% of respondents spontaneously mentioned tariffs, up from 60% in April.

Inflation expectations have surged, with year-ahead projections rising to 7.3%, the highest since 1981, and long-term expectations increasing to 4.6%.

The Conference Board’s Consumer Confidence Index® also reflected a downturn, dropping by 7.9 points in April to 86.0 (1985=100). The Expectations Index, which gauges consumers’ short-term outlook, fell to 54.4, the lowest since October 2011 and well below the 80-point threshold that typically signals a recession

Travel is a discretionary expense that reflects consumer sentiment. When people are less confident about their financial prospects, they are less likely to plan vacations or leisure trips.

According to the Conference Board, the share of Americans planning to take a vacation in the next six months slipped below 40% in February for the first time since the pandemic. It ticked up slightly to just above 40% in April, but that was down from more than 44% a year earlier.Americans cite economic concerns and stock market weakness as reasons to cut back on summer vacation plans; many are swapping air travel and extravagant holidays for road trips and shorter vacations.

According to a Deloitte report, 41 percent of respondents are taking a trip of three nights or fewer, compared with 37% last year. See, Europe Is Out. Road Trips Are In. Welcome to the Scaled-Back Vacation:

The market’s rebound and the tariff pause didn’t change Ruswick’s mind. “I don’t have faith this is going to stay this way,” the 29-year-old software engineer said.

He feels pinched, now that prices for soda, meat and seemingly everything else are up significantly from a few years ago. His rent is also higher, and homeownership feels out of reach. The family is now planning a road trip for later this summer to South Dakota’s Black Hills.