"Economists are pessimists: they've predicted 8 of the last 3 depressions."
--Barry Asmus

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Friday, May 27, 2011

Personal Income and Outlays. Now With 100% Less ROYAL WEDDING!!!!!!

We've got a mixed bag of economic data coming out today,starting off with personal income and outlays.  Which is, of course, an index that tracks overall changes in personal income.  And personal outlays[1].  It also has one particular measure of inflation, although it's not the "official" inflation that the Fed looks at.  The market sits up and pays attention to this metric.  Why?  Well, consumer spending is around one-third of GDP, so this is a clear and present (if one month lagging) indicator of where GDP is going.
Last month - and nobody in the news media cared last month because it came out the same day as the ROYAL WEDDING!!!!!!! - we had a pretty good March report.  Personal income increased 0.5% (beating expectations), consumer spending increased 0.6% (beating expectations), and the core PCE index increased 0.1% (right in line with expectations).
Other interesting March facts included:  disposable personal income increasing 0.6%, real disposable personal income[2] increasing 0.1%, and the PCE price index increasing 0.4%.  Personal savings as a percentage of DPI fell to 5.5%, and personal current taxes increased $2.5 billion.
There were warm fuzzies all around, and singing and dancing in the streets.  Unfortunately, that was pretty much all due to the ROYAL WEDDING!!!!.  The market was still reeling from the previous day's surprisingly bad GDP report to feel a lot of joy out of this.
This month, the Econoday-surveyed analysts are feeling a little less optimism about April.  They're calling for personal income to increase only 0.4%, for consumer spending to increase only 0.4%, and for the core PCE price index to increase 0.2%.  That's nowhere near the excitement, but there is 100% less ROYAL WEDDING!!! to compete with for headline space.
The actual results come from the Bureau of Economic Analysis, and are found in the Personal Income and Outlays, April 2011 report.  Perusing that we learn that personal income increased 0.4% (meeting expectations), personal consumption expenditures (aka consumer spending) increased only 0.3% (missing expectations), and the core PCE price index increased only 0.1% (beating expectations).
Moving away from what the analysts look at, disposable personal income increased 0.3%, but real disposable personal income increased less than 0.1%.  The PCE price index increasing 0.3%.  Personal savings as a percentage of DPI fell to 4.9%, and personal current taxes increased $11.0 billion.
That's a mixed bag, but it isn't bad news at all.  Income increased as expected and, while you all didn't do your expected part in driving GDP forward by spending that increased income[3], you got more bang for your buck than would have been expected.  Assuming you didn't waste any money on volatile and expected to revert to the mean things like food and energy.  If you did, then costs increased at the same rate as income (which could be a net gain or loss, depending on what your income is, what your costs are, and whether or not you actually saw your income increase).
On the other hand, you probably decided to save less money[4], and you probably paid more taxes.
Still and all, I'd call this report a net win for the market.
[1]  What do you want from me?  It's exactly what it says on the box.
[2]  That's disposable personal income adjusted to account for price changes.
[3]  For shame.  Have you no sense of patriotism?
[4]  Making Papa Keynes proud

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