Real (inflation adjusted) Personal Consumption Expenditures (PCE) spending jumped 0.6 percent in July. Real Disposable Personal Income (DPI) declined 0.2 percent.
The BEA’s Personal Income and Outlays report for July shows consumers picked up the pace of spending for the second month.
Key Income and Spending Points
- Disposable (after tax) Personal Income (DPI) was flat in July.
- Adjusted for inflation, Real DPI fell 0.2 percent.
- Personal Consumption Expenditures (PCE) jumped 0.8 percent in July.
- Adjusted for inflation, PCE rose 0.6 percent.
- Real means adjusted by the PCE price index as measured by the BEA.
- Personal Current Transfer payments (PCTR) primarily includes Social Security, Medicare, Medicaid, and Food Stamps.
Price Indexes
- The PCE price index and Core PCE (excluding food and energy), both rose 0.2 percent in July.
- Compared to a year ago, the PCE price index rose 3.3 percent, an increase of 0.3 percentage points from June.
- Compared to a year ago, the Core PCE price index rose 4.2 percent, an increase of 0.1 percentage points from June.
Personal Consumption Expenditures
Those are nominal numbers. Inflation-adjusted, spending rose 0.6 percent in July and 0.4 percent in June as the lead chart shows.
Consumers has gone on a huge spending spree in the last two months.
Personal Income Five Ways Plus Taxes
The three rounds of fiscal stimulus are easy to spot in the top three lines.
PCTR stands for Personal Current Transfer payments. PCTR primarily includes Social Security, Medicare, Medicaid, and Food Stamps.
Personal income has steadily increased. Real disposable income is another matter.
Real DPI minus PCTR was $12.361 trillion pre-pandemic, February of 2020. It’s only $12,491 Trillion now.
Real PI minus PCTR was $14.415 trillion in February of 2020. It’s only $14.769 trillion now. That’s a total rise of 2.4 percent over 3 and a half years.
This is the measure the NBER watches to determine reaccessions. Real income has stagnated. This suggests the income view of recessions is the correct view.
Negative Revision to 2nd Quarter GDP, Huge Discrepancy with GDI Continues
GDP vs GDI Chart Notes
- Real means inflation adjusted
- GDP is Gross Domestic Product
- GDI is Gross Domestic Income
- Real Final Sales is the bottom line assessment of GDP. It excludes inventories which net to zero over time.
Major Discrepancy Between GDP and GDI
GDP and GDI are two measures of the same thing, one from a product perspective, the other from an income perspective. Over time they merge.
The last three quarters of GDP starting with 2022 Q4 are 2.6 percent, 2.0 percent, and 2.1 percent. The last three quarters of GDI starting with 2022 Q4 are -3.3 percent, -1.8 percent, and 0.5 percent.
GDI is still consistent with a recession starting 2022 Q4. GDP isn’t. The NBER, the official arbiter of recessions, averages the two measures. The result is inconclusive for Q4 and Q1 combined.
For discussion, please see Negative Revision to 2nd Quarter GDP, Huge Discrepancy with GDI Continues
Philadelphia Fed GDPplus Measure Sure Looks Like Recession Started in 2022 Q4
GDPplus is a measure of the quarter-over-quarter rate of growth of real output in continuously compounded annualized percentage points.
It’s a blend, but not an average, of Gross Domestic Product (GDP) and Gross Domestic Income (GDI). It is much smoother than either GDP or GDI as the above chart show.
GDPplus vs Recessions Since 1960
In 100 percent of the cases, with no false signals, no misses, and no lead times more than two quarters, every time GDPplus had two consecutive quarters of negative growth, the economy was in recession.
GDPplus and GDI were both negative for two consecutive quarters starting fourth quarter of 2022.
For more charts and discussion, please see Philadelphia Fed GDPplus Measure Sure Looks Like Recession Started in 2022 Q4
The deeper one looks, the more likely it appears that GDI and GDPplus offer a better take of the economy than GDP.
Two and one half years of Covid.
Then mid 2023 – June and July – Summer without masks.
Just put it on the credit card.
Where and How, does the money not spent, but coming into peoples pockets just the same, get calculated into the numbers, or does it?
I see continuous charts and graphs on money spent, which is not as easy a calculation that one would summarize imo. Maybe I am just missing something?
For example, over the past couple of years now, School Loans, Rent/Mortgages, and car loans were all delayed. That is “if” you chose to delay them. Some people still paid all there bills, some paid partials and some paid nothing at all.
How do the numbers get fettered out, to show specifically how much $ (or %) was actually spent per Person/Family, and how many didn’t pay anything at all? How do these numbers get calculated into the numbers or do they?
I know quite a few people, who have not paid a dime for all three, and have been traveling, bought a new car, and are living large compared to what the Fake News Displays.
When I was putting a garden in, planning for chickens, and driving my 2014 car, I kept watching this occur all around me. Getting asked: Why am I not going out to eat, or to see shows, and get a new car like a lot of people around me were doing.
So this debt is coming due now, and many I know don’t have it. They will not be able to catch up or even restart their rent/mortgage payment’s on time. Forget car loans, unless they plan to live in them (I would have bought a van myself), that is last on the list after housing, food and fun!
I just don’t see how and/or where these numbers are or can be calculated accurately in any way. I think a lot more pain is on the way, and people don’t have a clue as to how bad it will get if what I see is an accurate reflection on what is actually happening.
What Do You See???
I think I’m going to see a lot of TV reporters on the evening news talking to poor downtrodden suffering folks that never learned to stop spending and save anything. At appropriate times there will be speeches from the Administration and free money and stuff.
I think the consumer is much more robust than most of these comments suggest. Esp millennials. Their incomes are way up, they’re spending & they’re savings are up. All is well.
What a Hoot!
Maybe…but from my reading, US consumers have a total savings of greater than $700 billion. That’s pure gravy — total earnings not spent. This massive amount of income/savings adds to the growing overall wealth that the US consumer has already amassed in their other investments, be they MMFs, securities, home equity, NFTs.
Consumers — namely the newly-moneyed millennials who are finally getting their day in the sun — are spending spending spending, but they’re earning and saving far more.
If the money was paid, it was spent.
If the gov’t handed out free money it is in PCTR.
It’s all accounted for but subject to revisions.
Much easier and highly likely more accurate than GDP.
I get down voted for speaking truth. Fine. Use to it. End of the day the rest of the world is not going to put up with it anymore. It might take them 10, 20, 30 years but the game is up. Most of us will die before this unravels but it will unravel. The era of printing paper is ending. I am still young enough where I might actually get to see it unravel. Not happy about it but I understand it.
I think consumer debt is going up because cars, rent, insurance and other necessities are getting much more expensive rapidly. With over half of the population without a $1000 bucks to their name it goes on a credit card. Rough seas ahead
Walmart’s got Christmas stuff out… the Consumption Season is upon us!
Kale by the pound cost between $1.0 and $1,5. It kills pharma.
I prefer Kentucky Bluegrass with just a bit of Red Fescue.
We tried a regime change in Venezuela, but failed. As long as Venezuela is threatening Exxon and Hess Guyana cannot confiscate our oil assets.
In my neck of the woods the kids went back to school in august so parents and teachers started spending in july, hoping for sales.
Saw a few cheapies but my kids are grown and there was nothing I was low on so didn’t take advantage
It was all my fault, unfortunately. I bought a truckload of clear cedar boards in July to build my sauna now. The bill has coe due and I haven’t gotten around to paying it yet. So there’s a lag between my big July splurge and the September savings rate crash I’m about to experience…
how great would it feel to sit in sauna this winter knowing you stiffed the banks by not paying your credit cards…………
Spending during inflation is one of the only ways to fight it. Money is rotting in the bank. Get it the heck out of there and buy something before the price goes up higher. Venezuelans are pros at this game.
Venezuela didn’t have inflation, they had hyperinflation, which is hardly analogous to what has happened here: a mismatch in demand and supply caused by government policies of closing the supply side of the economy and then goosing the demand side with transfer payments.
As dumb as that was that’s not the same thing as Venezuela at all. If it was, you’d see the real estate market and the stock market going through the roof right now.
Instead, everywhere you look you can see liquidity issues… risk aversion, demand for safe, liquid collateral, a global trade recession and an unwillingness to lend. Contraction. These signals indicate a hard recession, credit events, and bank failures all to come. CRE is going to come under the spotlight again. And possibly sovereign debt.
Inflation and hyperinflation are the same thing just different stages of inflation. We don’t have recessions. If it gets out of hand the government carpet bombs the poor with money and bails out companies. We own the global printer so why not do it. We will keep doing it forever. Print some for Ukraine, whoever we want.
Peppino Di Capri : Melancholi in Septembre.
The United States has a comparative advantage in consumerism. We are downright the best in the world at it.
Other countries produce, we consume.
Lock a US citizen down for a couple of years and the amount of retail therapy necessary for recover is tremendous.
Shop till ya drop!
every dollar general I’ve been to is such a dump, crap layiing everywhere, you don’t think that might have anything to do with earnings, maybe not.
Only if that was a change to operations, but Dollar stores have always been like that in my experience.
So earned income was up but got wiped out by a decline in free government money. Sounds good to me.
Great work, Mish, thanks.
That spending number is a huge surprise, especially in face of declining real incomes, although I’d expect the spending number to slightly lag the income number.
Is there any chance the spending came out of a sort of whiplash household inventories effect? Spending was depressed in the prior time periods, and there was indication of disinflation… did the consumer postpone spending plans until they could no longer, giving July a bump?
PCE goods a real surprise: +0.9, +0.6, +0.7 nominal last three quarters.
di di di da dit ad dit – Charge-It
link to youtube.com
Well that $150M of excess savings I mentioned a few articles ago has likely now mostly evaporated. So the question will be sustain from here. Still that Goods number *is* quite the surprise. IIRC, and please correct me if I’m wrong, but goods tends to lead services, does it not? Need goods to have services.
$150B not $150M. Only a order of magnitude brain fart, lol…
The difference is 3 orders of magnitude, not 1.
re: “Real income has stagnated”
Sadly, the damage has already been done. It’s not fixable without the pain that nobody will tolerate. The poor have to change their diets because of high food prices. This will affect their health.
Dollar General down 14 percent as I type this so that indicates the people that shop there are struggling.
link to finance.yahoo.com
Actually bags of Kale, Spinach, and other veggies have barely budged in the last 3 years- $5.99 for a huge bag – to make smoothies etc- during Covid hoarding the only thing left on the shelves was cheap healthy foods that no one wanted –
I’m keto so kale, smoothies etc, are not things I personally would consider key to good health. Liquid calories especially are a no-no.
Meat on the other hand…
Steam kale for 5 min, mix it with a few drops of balsamic vinegar ==> chew,
chew, grind the kale, with your saliva, to produce Nitric Oxide that extends your life.
Avoid mouth wash rinsing and toothpaste with flouride that kill 99% of your oral bacteria. Dentists destroy our health.
That’s not really a convincing argument for kale, at least personally. And I largely rely on salt for mouth health, as humans have for millennia.
Keto has already extended my life. After the cancer I had at 27yo metastasized at age 34, I was told I had a 20% chance of surviving 5years.
I celebrated the anniversary of beating that indictment a few weeks ago. Now 23 years and still going. Of course, this is anecdotal and is only my one particular case, but it has clearly worked out well for me. So thanks for the advice, but I think I will continue to avoid most sugar-based foods except in the minimum amounts I need to round out my largely meat and fat-based diet (which keep the old mitochondria and pancreas happy).
One thing that has become evident to me over the decades is that people view their eating and diet on religious terms. It’s a belief system and as such very difficult to convince people (in either direction) about what is really the *practical* thing to do. For me, its to avoid sugars, for other people meat. Such is the world of food.
The fatties WILL have their fudge rounds!
And alternatively, Costco sales are up. There are two economies….
link to finance.yahoo.com
Yes because the poor always ate quality food before. It was definitely broccoli and kale not hotdogs and Doritos.
There is an element of truth there. Seasonal vegetables and beans and rice were a better diet for the poor (or anyone else) than sugar water, Doritos and hot dogs.
Townsends on YouTube has a bunch of videos on frontier cooking. It was rather interesting. If you have a nutmeg you’re in business. 😉