The way personal income and personal consumption expenditures data is headlined, you would not be wrong in thinking the USA consumers are again dining in May 2011.
Personal income increased $36.2 billion, or 0.3 percent, and disposable personal income (DPI) increased $29.2 billion, or 0.2 percent, in May, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $4.6 billion, or less than 0.1 percent. In April, personal income increased $37.7 billion, or 0.3 percent, DPI increased $27.9 billion, or 0.2 percent, and PCE increased $28.8 billion, or 0.3 percent, based on revised estimates.
Real disposable income increased 0.1 percent in May, in contrast to a decrease of 0.1 percent in April. Real PCE decreased 0.1 percent, the same decrease as in April.
The headlines have 7 increases and only one decrease. The second paragraph of the headlines is real income and expenditures – in other words inflation adjusted money. Here the headlines are tied with one increase and one decrease. For those who use GDP as a measure of economic activity – it is EXPENDITURES and not income which are used to calculate GDP.
And the headline GDP is inflation adjusted.
The red line in the above graph is inflation adjusted expenditures – the USA economy is clearly in a downtrend – and the data has been contracting for the last two months. Again, GDP is calculated on expenditures, the consumer is over 60% of GDP – and the consumer spending is contracting.
Income interestingly had positive growth in May, after several months of real contraction.
The PCE is telling you unless June turns into a great month – that 2Q2011 GDP will be worse than 1.9%.
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