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The Impact on Spending of Three Rounds of Free Money is Waning

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8 comments on The Impact on Spending of Three Rounds of Free Money is Waning

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Personal Income and Outlays

Today the BEA released its Personal Income and Outlays report for June 2021 including an Annual Update.

Key Items

  1. Personal income increased $26.1 billion (0.1 percent) in June.
  2. Disposable personal income (DPI) decreased $2.6 billion (less than 0.1 percent)
  3. Personal consumption expenditures(PCE) increased $155.4 billion (1.0 percent).
  4. Real DPI decreased 0.5 percent in June and Real PCE increased 0.5 percent
  5. The PCE price index increased 0.5 percent. 
  6. Excluding food and energy, the PCE price index increased 0.4 percent

I will do a separate report on real numbers and price indexes. 

Personal Current Transfer Receipts

PCTR (Black line on chart) stands for Personal Current Transfer Receipts. 

It consists of items like the Food Stamp program now called Supplemental Nutrition Assistance Program (SNAP). PCTR also includes three rounds of stimulus checks.

The three spikes in income represent three rounds of pandemic assistance that went out indiscriminately whether one had a job or not. 

In turn, those PCTR spikes (Black line) directly fed spikes in income (dark Blue line). 

The Red line shows personal income minus PCTR and the Green line shows consumer spending. 

Pre-Pandemic (February 2020 vs June 2021)

  • Income: 19,006 Then, 20,414 Now (+7.41%)
  • Income Minus PCTR: 15,798 Then, 16,348 Now (+3.48%)
  • PCTR: 3,208 Then, 4,067 Now (+26.78%)
  • Spending: 14,785 Then, 15,772 Now (6.68%)

That 6.68% is over 16 months. It was supported by three rounds of stimulus.

The last spike of free money took spending from 14,700 to 15,459 in March of 2021 (a leap of 5.16% in a month). 

Since then, spending rose from 15,459 to 15,772 (an increase of 2.02% in three months).

That’s a robust increase but its waning. It also reflects still elevated PCTR vs pre-pandemic as well as millions of people making more being unemployed than they did employed.  

Federal unemployment assistance ends in September in all states and already ended in July in many Republican states that voluntarily opted out of the program due to worker shortages.

Looking Ahead

Yesterday, I reported US 2nd-Quarter GDP Exceeds Pre-Pandemic High But Huge Concerns Remain

Among those concerns are evictions, the end of huge unemployment insurance benefits, and a rise in the Delta variant of Covid. 

Expect a rapid deceleration of growth in the second half of 2021.

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Mike Shedlock

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8 Comments
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AWC
AWC
4 years ago
The Fed’s aren’t going to let this all go in the tank. They have already proven that they can hold it together,,,,,longer than most folks can imagine. But, hey, go ahead and fight ‘em, if you feel lucky. Remember when bonds were toast? I took the “other” on that. Remember when oil was free? Like, they had to pay to get rid of it? Jumped on it. The entire world runs on the stuff. And it will for many more decades. 
Oh, and that perpetual 10 year Real Estate “Crash?” Ever wonder why they call it “REAL” Estate?
Long American Corporatism, short deflation hobgoblinry. May not like it, but it’s what’s for dinner.
And, aside, how ‘bout that $trillion repo event? What. Ever. It. Takes!
Hummm? And if it gets really scary for TPTB, maybe Defense Stawks? 
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Eddie_T
Eddie_T
4 years ago
Cocaine’s for horses now it ain’t for men. The doctor said it’ll kill you but he didn’t say when.
My stimulus is wearing off. I need a little more stimulus to get me through the end of the year.
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anoop
anoop
4 years ago
that’s why there will be a 4th round, 5th round, … , nth round, eventually ending in a digital dollar with ubi.  we just need a crisis or 3 to help congress get all the bills passed.  the bills are already written.  haha
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Mish
Mish
4 years ago
I did get a hold of the Census Dept today, but the wrong person. Have another call in. 
However, talking with the person I did, it does seem my numbers reflect individuals not households as some suspected. 
I believe I have a good way of translating individuals to households that I am attempting to confirm. Even still, 12 million people at risk of eviction is a lot of people.
Mish
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Carl_R
Carl_R
4 years ago
Reply to  Mish
It remains to be seen what will happen when 12 million are evicted at the same time. That will create a lot of vacant apartments, and a lot of people looking for apartments. It might just be a big game of musical chairs. Person A is evicted from Apartment A, and Person B is evicted from Apartment B. So, person A moves into the now vacant Apartment B, and Person B moves into the now vacant Apartment A. The difference will be that both Person A and Person B will now have to start actually paying rent, so as not to get evicted again.
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thimk
thimk
4 years ago
Reply to  Carl_R
Ya,, zero sum game but will put inflationary pressure on rents . 
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jhrodd
jhrodd
4 years ago
Reply to  Carl_R
The vacancy rate around here is less than 1% and in spite of any rules or assurances no one with an eviction on their record is going to rent apartment A, apartment B, or apartment C, etc.
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MrGrummpy-
MrGrummpy-
4 years ago
Reply to  Mish
I personally know of a couple that stopped paying rent as soon as the eviction moratorium started.  They have enjoyed months of extra disposable income.  Now that they are being evicted they will rely on local government to find them new housing.  One of them works a cash paying job and the other has been living off of government benefits for years.  And so it goes…
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