THE DOUBLE PCE WHAMMY TO GAMING

I’ve updated the PCE chart from my 08/08/08 post, “SCARY MACRO CHART FRIDAY”, that showed gaming would suffer a $20bn loss just on mean reversion of gaming spend % of PCE. Gaming was more levered on the upside to housing than other consumer sectors and could be on the downside as well.

Personal consumption expenditures have been a rocket ship over the past 20 years. Gaming revenue growth has been even more impressive. Gambling spend accelerated from 0.3% of PCE in 1990 to a peak of 0.94% in December, 2006. The trend broke soon after that all the way down to 0.79% in June of 2008. As a point of reference, if gambling reverts to the mean since 1990 of 0.6%, revenues would fall by $20bn annually or over 20% of the current level. This trend could be a double whammy in a prolonged consumer slowdown.

PCE likely to fall as is gaming's share. Ouch