- by New Deal democrat
In Q3, personal spending rose 1.6%, or 6.4% annualized, while personal incomes only rose 0.8%, or 3.3% annualized. A little more precisely, personal spending rose 0.75% more than personal incomes.
Just how much more did spending rise than the income to fuel it compared on a historical basis?
In the past 80 years (or 280 quarters), spending only exceeded income by 0.75% or more only 29 times. In other words, in only 10% or all quarters has spending exceeded income so much:
Needless to say, this is not sustainable. This is particularly so when real disposable personal income did not grow at all last quarter, and real personal income excluding government transfer payments has not increased at all in the past two quarters:
As I have written a number of times in the past few months, this is probably spending driven by the “wealth effect” which in turn is driven by stock market gains.
Unless you think we are headed for AI-driven nirvana, this is not going to last.
