From the Financial Times:
In June, spending adjusted for inflation rose 0.1 per cent after gaining 0.2 per cent in May. Real spending on services edged up 0.1 per cent, while spending on goods rose 0.2 per cent, the commerce department said.Personal income was flat after increasing 0.3 per cent in May. It was the first time since September that incomes had not risen. Markets had expected income to rise 0.2 per cent in June from a previously reported 0.4 per cent rise in May.
Let's take a look at the data:
Real PCEs arfe still moving higher, although the pace of increase has slowed over the last two months.
Service expenditures -- which comprise about 65% of expenditures -- have moved higher over the last two months after remaining near the same level for the preceding 9 months.
Non-durable goods purchases have stalled, as have
Durable Goods purchases.
1 comment:
The entire increase in PCE is due to increases in govt spending, all on borrowed money.
The largest component of PCE is "health". It currently makes up over 20% of the total PCE, and over half of that is government spending, mostly fueled by borrowing. Since Q1 of 2008, there has been an increase of $73 billion in PCE. The increase in spending in the "health" category has been $150 billion in the same period.
http://www.bea.gov/national/nipaweb/nipa_underlying/TableView.asp?SelectedTable=14&FirstYear=2008&LastYear=2009&Freq=Qtr&ViewSeries=Yes
Spending on "education" is also up by $20 billion, most of which is funded by government loans and grants or govt subsidized loans.
The category of food and beverages for off-premises consumption (grocery stores) is up by $24 billion, but that too is only up because of govt transfer payments.
Discretionary spending on clothes, transportation, home furnishings, and recreation are all down, some substantially.
IMO, there is no way to use the increase in PCE as evidence of a sustainable economic recovery.
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