Consumers seem to be hunkering down in February as income outpaces spending.
Chart Notes
- Disposable means after taxes
- PCE means Personal Consumption Expenditures
- Real mean inflation adjusted by the PCE price index
The Personal Income and Outlays Report for February 2025 sports a mixed bag of strong income, stronger than expected inflation, and weak real spending.
The PCE price index was hotter than expected in February. Yet despite a surge in incomes, real spending was weak.
Personal Income
- Personal Income increased $194.7 billion (0.8 percent at a monthly rate) in February
- Disposable personal income (DPI), personal income less personal current taxes, increased $191.6 billion (0.9 percent)
Personal Income and Real Personal Income
PCTR stands for Personal Current Transfer Receipts, income for which no services were performed. Examples include Medicare, Medicaid, food stamps, and Social Security.
The pandemic free money spikes stand out. DPI did not exceed the March 2021 high until December of 2024 (blue highlights). Real DPI has still not exceeded the March 2021 high (yellow highlight).
Free money and inept Fed policy spurred massive inflation that the Fed is still fighting.
Real PI Minus PCTR
Note the orange line, Real PI minus PCTR. That is the line the NBER uses to assist determining recessions.
Real PI minus PCTR was 16,397 in January. It’s now 16,415. That is a very weak rise of 0.1 percent.
Personal Current Transfer Receipts
PCTR surged surged 2.2 percent in February. Real PCTR rose 1.9 percent.
PCTR fueled income in February. A big uptrend started in December 2023 with another spike this year.
Hooray, free money! I somehow suspect Biden is behind this, but I have not investigated the surge.
The important point is the surge in income is not what it seems.
I will cover PCE inflation in a separate post.
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From Apr 2nd: lower gov payroll, higher income tax collection, higher capital gains, higher income from tariffs and no tax returns. Consumption up, Import down, inventory up ==> until the dems shut the gov down in June.
$ amounts of disposable personal income are rising fast, but for fewer and fewer people.
$ amounts that folks can spend are falling for more and more people.
Real PI minus PCTR should be: Real PI minus REAL PCTR. The Real Transfer money deflated
Yet again, this all comes back to immigration. 10+ million illegal immigrants have cut back on spending. Why spend if you can be deported tomorrow? Better to stockpile cash and take it with you when you are booted from the country. That’s what the immigrants *believe*. The reality is that no more than a few million illegal immigrants (out of the ~20 million illegal immigrants living in the US, half of those here for longer than four years) will ever be booted out over the next four years and probably a lot less than that. Biden’s immigration-inflation really screwed things up.
It appears mish turned into another Elon I got in the past just as many as likes and dislikes as him the administrator and he blocked my last comment, therefore good bye.
What the hell are you even talking about?
I would like Mish to turn into another Elon. We could use all the Elons we can get. May I ask did Mish get Elon-like wealth as well?
The Trump induced recession is here. Just wait till the tariffs kick in next week.
https://fortune.com/2025/03/26/walmart-ceo-doug-mcmillon-customers-stressed-valuation-stock-drops/
“Consumers seem to be hunkering down in February as income outpaces spending.”
Maybe they are saving that income to pay their student loans. Or property taxes if they don’t use escrow.
I have plenty of real income. I have no disposable income. What’s that?
By disposable income do you mean discretionary income?
My main judge of recessions is traffic. We aren’t there yet.
The “Magic Money Machines” haven’t been turned off yet.
AS Mish said, Biden threw as much money at this pig as possible.
but it wasn’t money — it was debt. I’ve grown to really appreciate J.P. Morgan’s quote. Gold is money. Everything else is credit.
Trump added 6 trillion in his first four years. Just a regular little thrifty guy. A man of the people.