Inflation has eaten up every penny of income gains for the last year.
Today the Bureau of Economic Analysis released Personal Income and Outlays data for the month, and it looks grim.
This article was originally published by Mish Talk.
Details
Real means inflation adjusted. Real spending fell 1 percent in December with spending on goods down 3.1 percent.
Personal income and disposable personal income rose 0.3 percent and 0.2 percent respectively, but real disposable personal income was a disaster.
Real Disposable Personal Income Details
Those numbers are based on the PCE price index, not the CPI. The PCE price index is understated relative to the CPI. Both are grossly understated factoring in housing prices.
Personal Income and Real Personal Income
Personal Income and Real Personal Income Details
Personal Income and Real Personal Income Since 1959
Personal income is on a slow exponential rising trend. But all of that is due to population increase. A good way to account for growth is on a per capita basis.
Real Disposable Personal Income Per Capita
With boomers retiring en masse, guess where this is headed.
Real Disposable Personal Income Per Capita Since 2020
Real Disposable Personal Income Per Capita Details
4th Quarter GDP Up 6.9% Is Mostly An Artificially Boosted Illusion
The impact of three rounds of fiscal stimulus are over. Meanwhile, a massive inventory build by merchants is underway.
I discussed the current setup in GDP Up 6.9% Is Mostly An Artificially Boosted Illusion
Inventory Adjustments
Change in Private Inventories (CIPI) added a whopping 4.9 percentage points to real GDP in the fourth quarter. Since inventories net to zero over time, the true bottom-line estimate of real GDP was 2.0%.
For the third quarter, CIPI added 2.20 percentage points to real GDP.
Thus, of the reported 2.3% GDP gain for the third quarter, nearly the entire rise was an inventory adjustment.
Retail Sales Unexpectedly Flop in December, Down 1.9 Percent
On January 14, I noted Retail Sales Unexpectedly Flop in December, Down 1.9 Percent
Here We Are!
The Fed has everything under control. So, what can possibly go wrong?
I now expect a recession no later than the end of 2023.
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