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    Income and Spending Statistics Provide Little Insight for US Economy


    Today's statistical picture of the United States economy was very much an economic version of the old saying, “You pays your money and takes your choice."

    The information on April began with personal income which at 0.4 percent was better than the 0.3 percent forecast and much improved on the flat reading in March.  

    This was followed by personal spending, unchanged in April on expectations for a 0.2 percent gain. The prior month was revised to 0.5 percent from 0.4 percent.  

    Wrapping up the consumption numbers was real personal spending which is the above personal spending figure adjusted for inflation. It was also flat in April with March revised to 0.4 percent from 0.3 percent. 

    The month to month variation in these income and consumption numbers since the recession has been almost nil. If economic recovery involves improving wage and spending statistics, then the economic picture in these numbers is of an economy that is, at best, marking time.

    In January 2010 the three month moving average for the monthly change in personal income was 0.3 percent, exactly what it was in April 2015.  For personal spending the average has gone backward a bit. Five years ago in January 2010 it was 0.3 percent by this April it had dropped to 0.2 percent. 

    The trend for real personal spending, the inflation corrected version of personal spending likewise shows no movement whatsoever. In January 2010 the three month moving average was 0.1 percent, and in April 2015 it was 0.1 percent as well. 

    A similar lack of improvement is exhibited in the annual numbers.

    If we start in January 2012 to avoid the statistical collapse in 2009 and its mirror image in the annual figures, we find the following in the three month moving averages: personal income January 2012-4.6 percent, April 2015-4.2 percent: Personal spending January 2012-4.0 percent, April 2015-3.0 percent.  

    Real personal spending is the exception. It has doubled from1.4 percent in January 2012 to 2.8 percent in April 2015.

    However much of that improvement is accounted for by the drop in the annual inflation rate. In January 2012 the three moth average of annual PCE inflation was 2.6 percent. The month before last it had collapsed to 0.2 percent. 

    Statistics can provide a glimpse of the economic reality on which consumers base their spending decisions.

    Judging by the lack of progress in the income numbers despite the much-touted job statistics, the jump in the saving rate in April to 5.6 percent, the second highest pace in over two years could be considered a sensible precaution.

    It should probably not have surprised economists that households choose to save whatever limited benefit they enjoyed from the recent drop in gasoline prices.

    After all, consumers have no real expectation of rising income and, as perhaps they anticipated, though apparently analysts did not, fuel prices almost immediately turned and went back up.


    Joseph Trevisani

    Chief Market Strategist

    WorldWideMarkets Online Trading

    Charts: Bloomberg

    persoanl inomce mth mv june 1

    personal comsumption  3 mth mv june 1


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