Consumers went on a spending spree in December, dipping into savings or borrowing to do so.
Personal Income and Outlays
The BEA’s Personal Income and Outlays report for December shows consumers went on an unsustainable spending spree.
- Personal income increased $60.0 billion (0.3 percent at a monthly rate) in December
- Disposable personal income (DPI), personal income less personal current taxes, increased $51.8 billion (0.3 percent)
- Personal consumption expenditures (PCE) increased $133.9 billion (0.7 percent).
- The PCE price index increased 0.2 percent.
- Excluding food and energy, the PCE price index increased 0.2 percent.
- Real (inflation-adjusted) DPI increased 0.1 percent in December
- Real (inflation-adjusted) PCE increased 0.5 percent; goods increased 1.1 percent and services increased 0.3 percent.
The St. Louis Fed has not updated its data repository yet, and there is also scheduled maintenance today. I will post more charts as data downloads become available.
4th Quarter GDP Up a Strong 3.3 Percent
Strong spending fueled fourth-quarter GDP.
For discussion, please see 4th Quarter GDP Blows Past Consensus, Up a Strong 3.3 Percent
Debt Soaring Out of Sight
GDP is fueled by both consumer debt and government debt. Regarding government debt, Republicans are in on the deal.
For example, The GOP Supports a Child Tax Credit Boost and Affordable Housing Expansion
Without passing anything but continuing resolutions, we went from a House Speake Kevin McCarthy’s proposal of $1.471 trillion bill to Mike Johnson’s $1.66 trillion bill that does not include, Ukraine, Israel, or the US border with Mexico.
Fueled by Debt
Total consumer credit, revolving credit, and credit card interest rates all hit new record highs in November.
Consumer Credit Hits Record $5 Trillion
For discussion, please see Retail Sales Surge 0.6 Percent, Beating Economist’s Expectations
Also see How Did Covid Change Your Propensity to Buy Things Online?
Consumers keep spending more and more, and much of that spending is online.
Should the Fed Declare Victory?
Some people want the Fed to declare victory already, despite Core PCE inflation running at 2.9 percent year-over-year.
For discussion, please see Hoot of the Day, What is the Fed Waiting On?
I corrected the title to say the increase in spending and income rather than spending and income.
What can’t be paid won’t be paid. Government debt, credit card debt, and commercial real estate debt is bad paper. Subtract it all from the money supply and the dollar will appreciate.
Gov spending is rising above income. Unsold private inventory is piling up. US GDP
is rising bc private inventory is up, gov and consumers spending are up and the trade deficit is down. China ordered Iran to curb the Hooties, or else, bc their export is suffering. Mike Johnson will curb Biden : Don’t !
The Dow is up to confuse recession watchers and to dump stocks and take profit.
This is only a Republican talking point when Democrats are in the White House:
“As Cheney’s quote about Reagan shows, Republicans habitually ignore deficits when they obtain power.”
Selected quote from Donald Trump Is Right: Deficits Don’t Matter | The New Republic
It’s true. Neither side controls spending. We have a Uni-party.
Maybe the 3rd party should be called the “F.C.P.” or “Fiscally Conservative Party” – – and they would be run out of town.
after civil war maybe – then new convention of states
I give up. Weren’t we supposed to be in recession. Yet, the Dow hit a new high and spending is rampant. What does 2024 hold?
Means-of-payment money ended a 22-month deceleration in Dec.
“What does 2024 hold?”
Same as before: More poverty. More crime. More illiteracy(if that is even possible….) More harassment. More theft. More totalitarianism. More wars. Lower quality of near everything. Even less competitive industry. Less significant academia. Falling even further behind communist China at absolutely every.single.thing.including.freedom. Increasingly falling further and further behind even Russia, Iran, Yemen and such, in ever more areas. Same stuff, different year, nothing new under the ever more financialized complete-lack-of-any-sun-whatsoever….
Incisive perspective. The deficits must be cut.
Isn’t December spending always crazy? Or is this SA numbers?
Yes, money flows reach a crescendo in January.
These are the 6 seasonal inflection points (they may vary a little from year to year):
Pivot ↓ #1 3rd week in Jan.
Pivot ↑ #2 mid Mar.
Pivot ↓ #3 May 5,
Pivot ↑ #4 mid Jun.
Pivot ↓ #5 July 21,
Pivot ↑ #6 2-3 week in Oct.
Each and every year, the seasonal factor’s map (economic time series’ cyclical trend), or scientific proof, is demonstrated by the product of money flows, our means-of-payment money X’s its transaction’s velocity of circulation (the scientific method).
A friend of mine is a salesman of containers for restaurants in the greater LA market. He said his sales are stronger than ever.
Another friend of mine sells temporary insurance to car dealerships. He said his business is the worse it’s ever been.
My industrial business in the LA area is way down. Many of my customers are losing money each month at this rate. Laying off employees and working with skeleton crews.
To sum it up, it seems that people are still blowing money on unnecessary things like eating out but they don’t have the extra money to buy a new car. We are definately in a recession even though the stock market is in euphoria.
The stock market is barely keeping pace with inflation. It’s not going up except for AI associated businesses.
Well, Total Market Value of the U.S. Stock Market divided by M2 has averaged 2 over the past 50 years. It’s now at 2.48 and the peak was at 3 in March 2000. 2 1/2 years later it went down to 1.3. The stock market lost half of it’s value in that time. We are very close to a double-top in market value.
Restated:
Total Market Value of the U.S. Stock Market divided by M2 has averaged 2 over the past 50 years. It’s now at 2.48 and the peak was at 3 in March 2000. 2 1/2 years later it went down to 1.3. The stock market lost half of it’s value in that time. Are close to a double-top in market value?
Has the Stonk Market always been down concurrently with Recessions, Mish?