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Friday, December 21, 2007

Should We Be Jolly About Those Income Numbers?

The stock market seems pretty pleased with the consumer spending numbers that came out today. Personal consumption expenditures (PCE) were up a robust 1.1 percent in November. (The Commerce Department’s report can be read here.)

However, inflation as measured by the PCE price index jumped by a very disturbing 0.6 percent. That meant real personal consumption expenditures were only up 0.5 percent.

Inflation also bit into disposable income. Real disposable income growth, that is, growth in inflation-adjusted after tax income, was negative for the second month in a row – down by 0.2 percent in October and falling by 0.3 percent in November. Barring a snap back in December, this is a sharp change of direction after solid growth in real disposable income over three of the last four quarters.

Unfortunately, those income numbers released today are perhaps not all that jolly.

1 comment:

Anonymous said...

Based on this, would you say we are definitely heading into a recession?