Real (inflation-adjusted) consumer spending rose 0.4 percent in June. Real disposable income rose 0.2 percent.
The BEA’s Personal Income and Outlays report for June shows consumers picked up the pace of spending in June.
Key Income and Spending Points
- Disposable (after tax) Personal Income (DPI) rose 0.3 percent in June.
- Adjusted for inflation, Real DPI rose 0.2 percent.
- P:ersonal Consumption Expenditures (PCE) jumped 0.5 percent in June.
- Adjusted for inflation, PCE rose 0.4 percent, twice as much ass Real DPI.
- Real means adjusted by the PCE price indexes as measured by the BEA.
Price Indexes
- The PCE price index and Core PCE (excluding food and energy), both rose 0.2 percent in June.
- Compared to a year ago, the PCE price index rose 3.0 percent.
- Compared to a year ago, the Core PCE price index rose 4.1 percent.
Real Personal Consumption Expenditures
Real PCE goods peaked in March of 2021. All of the growth in consumer spending for 27 months is due to an increase in demand for services.
Real Income and Spending Billions of Chained Dollars
The focus on real rather than nominal income and spending is due to the fact that inflation-adjusted income and spending are inputs to real GDP.
The three rounds of fiscal stimulus, two under Trump and the last big one under Biden are clearly visible in the above chart. The next chart provides a better look at the stimulus.
Personal Current Transfer Receipts
Free Money
Personal Current Transfer Receipts are income from which no services were performed. Medicare, Medicaid, food stamps, Social Security, and three rounds of free money fiscal stimulus during the Covid pandemic are examples.
When you hand out sudden, massive, amounts of free money, expect inflation. And that is just what happened.
The free money rolls on. Prior to the pandemic PCTR was $3.2 trillion, annualized. It’s now $4.1 trillion.
Real PCTR was $2.9 trillion and is now $3.2 trillion. Thanks to inflation, free money does not buy as much as it used to. Fancy that.
Real Disposable Personal Income
If we take away the free money, the above chart shows what’s left.
The National Bureau of Economic Research (NBER), the official arbiter of recessions, excludes free money in its determination of recessions.
Real Personal Income Excluding Transfers was $14.415 trillion in February of 2020. It’s now $14.754 trillion. That’s a total rise of 2.4 percent over 40 months.
Supposedly, the economy is humming and a soft landing is on the way. Sorry, I don’t buy it. Free money has papered over a lot of stuff.
Real GDP Beats Expectations, Rises 2.4 Percent in First Estimate for 2023 Q2
Yesterday, I reported Real GDP Beats Expectations, Rises 2.4 Percent in First Estimate for 2023 Q2
GDP and GDI Chart Notes
- Gross Domestic Product (GDP) and Gross Domestic Income (GDI) are two measures of the same thing.
- GDI numbers are not available for the initial estimate for the quarter by the BEA.
- Real Final Sales is the bottom line estimate of GDP. The difference between GDP and RFS is inventory adjustment that nets to zero over time.
GDI for 2023 Q2 is not yet available. But GDI for the prior two quarters was -1.8 percent and -3.3 percent respectively.
Income does not match GDP. Which one do you believe?
Beware the Huge Negative Lag Impact of Three Rounds of Covid Stimulus
Meanwhile, please Beware the Huge Negative Lag Impact of Three Rounds of Covid Stimulus
Payback for three massive rounds of free money is on the way.
“Personal Current Transfer Receipts are income from which no services were performed. Medicare, Medicaid, food stamps, Social Security, and three rounds of free money fiscal stimulus during the Covid pandemic are examples.”
I was taxed for 35 years on Social Security and Medicare. So I feel that I provided a “service” even though I definitely won’t receive anywhere near the inflation adjusted dollars that I paid.
“Payback for three massive rounds of free money is on the way.”
Denninger likes to use the term “incoming.” Schwab’s Great Reset isn’t just idle talk. Debt has gone parabolic and what can’t continue, won’t. A cycle has to end and start all over again. That’s why the year of Jubilee existed in Biblical times. The Fourth Turning. The 4th phase of a cycle. Notably, the 4th Turning war. Concerns of a potential 3rd world war continue to grow.
re: “Income does not match GDP.”
It’s not supposed to. There’s an excess of savings being gradually spent. And that’s also one of the consequences of spending borrowed money.
You are totally mistaken.
GDP and GDI are two measures of the same thing!
They should equal, and do so over time
Yes, there are two ways to calculate GDP, one is on the production side (output of goods and services) and one on consumption (spending input). Only the spending (consumption) component of personal Income is reflected in the “input” accounting of GDP, I believe. A lot of Macro-econ 101 assumes that personal net Savings = Investment, so it’s a wash, but this ignores the role of banks as intermediaries. If, assuming GDI = constant, consumers reduce spending by saving, private investment will offset this only if banks and other sectors are willing to finance inventory accumulation or other forms of spending. But what if they don’t (e.g. tighten lending standards, reduce government spending)? GDP will go down despite GDI = constant. Steve Keen (for example) emphasizes the net issuance of credit by banks in his modeling of GDP because this money creation by banks, independent of income, influences real spending (MV=PQ); he complains that most economists don’t understand the role of banks in the economy, and this is an example. In short, your assertion is correct only if S(t) = I(t). Over the long run, this may be true, but there are lags you cannot ignore. If I’m wrong, please help me!
the free shit army, is the only service of the USA that keeps winning while the USMC and army and navy……….keep losing, decade after decade. we are all flag officers in the United States Free Shit Army. at ease men.
This statistic is believable versus all of bs ones related to inflation at 3% and declining. Not in this country and probably no others as well.
The CPI used by social security has increased 2.39% in the last 12 months.
Consumer spending will contract in the Autumn.
Probably explains why we hit a new record for outstanding credit card debt every month.
https://fred.stlouisfed.org/series/CCLACBW027SBOG
The slope doesn’t bode well for the future. You would think with record low unemployment, the opposite would be happening. Another number that shows real numbers don’t sync with the government adjusted numbers.
Millions are going all in for the big spend down, so they can soon safely retire on the dole.