Personal Income Fails to Keep Up With Spending For Three Months

The BEA’s Personal Income and Outlays report for August shows a surge in inflation and spending but income doesn’t keep up.

Personal Income and spending chart from the BEA, highlights by Mish

Income, Spending, and Inflation Notes

  • Chained dollars mean inflation adjusted by the PCE price index, not the CPI
  • Real (inflation-adjusted) income fell for the second straight month meaning wages have not kept up with inflation.
  • The PCE price index jumped 0.4 percent in August and is up 3.5 percent from a year ago.
  • Excluding food and energy, the PCE price index rose 0.1 percent and is up 3.9 percent from a year ago.

In nominal terms, consumer spending is on a rampage. For the last three months, income was up 0.1%, 0.0%, and 0.2% while spending rose 0.4%, 0.9%, and 0.4%.

Disposable Personal Income Three Ways Percent Change

Spending Rampage

Real Income and Spending Billions of Chained Dollars

Note the three rounds of massive fiscal stimulus in the Covid pandemic. This triggered the most inflation since the 1970s. Economists debate how much “excess savings” still remains.

Real Disposable Personal Income Excluding Transfers

Transfer payments are government handouts for which no services were performed. Examples include Medicare, Medicaid, Social Security, and three rounds of free money fiscal stimulus.

Real DPI excluding transfers is one of the inputs to the National Bureau of Economic Research (NBER) in determining recessions. The NBER is the official arbiter of recessions.

Expect More Inflation Everywhere

Biden is doing everything humanly possible to stoke inflation with EV mandates, natural gas mandates, union pandering, student debt forgiveness, and regulations, some of which is blatantly unconstitutional.

Oil Price Tops Highest Level Since Summer of 2022, What About the SPR?

$WTIC West Texas Intermediate Crude chart courtesy of StockCharts.Com, yesterday’s close, annotations by Mish.

Please note Oil Price Tops Highest Level Since Summer of 2022.

Minimum Wage for Fast Food Workers Jumps 30% to $20 Per Hour in California

Also note the Minimum Wage for Fast Food Workers Jumps 30% to $20 Per Hour in California

The UAW is on strike for massive wage and benefit increases, and more strikes are on deck in other places. Given stagnant productivity, these wage hikes are very inflationary.

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DJ
DJ
7 months ago

Some of the comments here are showing a remarkable lack of the most simple of terms related to our economy.

READ UP. LEARN MORE every day.

DJ
DJ
7 months ago
Reply to  DJ

..lack of understanding. My typing sucks.

William Benedict
William Benedict
7 months ago

Is there any chance this is not intentional?

Lisa_Hooker
Lisa_Hooker
7 months ago

No one needs for income to keep up with spending when credit is so easy.
At least that appears to work well for the US Congress.

KGB
KGB
7 months ago

BEA data are backed by the integrity of Joe and Hunter Biden.
Why do you bother reporting fake data, Mish???
USA has a corrupt federal government. The data are corrupted.

RonJ
RonJ
7 months ago

“The UAW is on strike for massive wage and benefit increases, and more strikes are on deck in other places.”

The writers have dropped their picket signs. I drove past Disney studios yesterday. The actors were picketing. Couldn’t tell if there were any name actors with signs. There was a joint rally not long before the writers strike ended. According to local news, few name actors were present.

matt3
matt3
7 months ago

I’ll stay in the stagflation camp. I do see a slow down in the economy now but inflation just keeps going. Slow growth and inflation or negative growth and inflation. Neither one looks very good.

shamrockva
shamrockva
7 months ago
Reply to  matt3

Growth is blowing it out this quarter, at least 3-4%. Inflation is coming down.

Bam_Man
Bam_Man
7 months ago
Reply to  shamrockva

How much “growth” do you think there would be if the guvvamint wasn’t running a $2 TRILLION+ annual deficit?

IMHO, there would be negative “growth”.

Shamrockva
Shamrockva
7 months ago
Reply to  Bam_Man

How much “inflation” do you think there would be without $2t deficits?

Siliconguy
Siliconguy
7 months ago
Reply to  shamrockva

The $6 box of cereal I complained about a few weeks ago is now $6.50. It used to be $4 a year ago.

Inflation in not slowing that I can see, not at the grocery store.

Who does Powell’s grocery shopping? Has anyone ever asked?

BENW
BENW
7 months ago
Reply to  Siliconguy

My great value A1 steak sauce is up 178%. It went from $1 to $2.78. I bought a bottle in the past week, and it jump $0.30 from $2.48 to $2.78.

It’s just ridiculously

Lisa_Hooker
Lisa_Hooker
7 months ago
Reply to  BENW

Typically the butler pays and has the cook select the foods, but the cook doesn’t go shopping, the food is delivered.

Jojo
Jojo
7 months ago
Reply to  Siliconguy

Levels Versus Rates: Why Inflation Is Slowing but Seems So High to Many
By Fisher Investments Editorial Staff — 9/25/2023

The level of prices and inflation rate are two different things.

If you are ever stuck at a social gathering you don’t want to attend and feel like stirring the pot for some entertainment, here is a line you can try: “Isn’t it nice how inflation is coming down?” We suspect you might not believe how riled up the group will get! “It isn’t coming down at all—I just paid over $40k for a mid-market sedan with bare-bones trim!” one acquaintance could say. “Eggs are nearly $10 per dozen!” another will retort, “And my weekly grocery bill is still sky-high.” At a human level, we totally get it. Inflation rates (the pace of increase) are down from last year, but that is cold comfort to the young mom paying more than $80 to fill the tank. But from a macroeconomic perspective, there is a critical divide in this thinking, and we think understanding it is key to understanding how markets have moved on from inflation so quickly.

link to fisherinvestments.com

DJ
DJ
7 months ago
Reply to  shamrockva

You are showing how little that you understand about the definition of Inflation.

Please share that with in one short phrase or just shut the fuck up.

Jojo
Jojo
7 months ago

Well clearly fast food workers hourly minimum needs to be increased to $25/hr then!

Stewgotz
Stewgotz
7 months ago
Reply to  Jojo

Why not $40?

Jojo
Jojo
7 months ago
Reply to  Stewgotz

$100/hr!

Avery2
Avery2
7 months ago

I hope Mitch is Dianne’s escort for the trip down, and in this case not to China.

shamrockva
shamrockva
7 months ago
Reply to  Avery2

Geez. Donnie too then.

Bam_Man
Bam_Man
7 months ago

The standard of living of the average American is dropping steadily and that trend can unfortunately be expected to continue.

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