The BEA’s Personal Income and Outlays report for August shows a surge in inflation and spending but income doesn’t keep up.

Personal Income and spending chart from the BEA, highlights by Mish

Income, Spending, and Inflation Notes

• Chained dollars mean inflation adjusted by the PCE price index, not the CPI
• Real (inflation-adjusted) income fell for the second straight month meaning wages have not kept up with inflation.
• The PCE price index jumped 0.4 percent in August and is up 3.5 percent from a year ago.
• Excluding food and energy, the PCE price index rose 0.1 percent and is up 3.9 percent from a year ago.

In nominal terms, consumer spending is on a rampage. For the last three months, income was up 0.1%, 0.0%, and 0.2% while spending rose 0.4%, 0.9%, and 0.4%.

Disposable Personal Income Three Ways Percent Change

Spending Rampage

Real Income and Spending Billions of Chained Dollars

Note the three rounds of massive fiscal stimulus in the Covid pandemic. This triggered the most inflation since the 1970s. Economists debate how much “excess savings” still remains.

Real Disposable Personal Income Excluding Transfers

Transfer payments are government handouts for which no services were performed. Examples include Medicare, Medicaid, Social Security, and three rounds of free money fiscal stimulus.

Real DPI excluding transfers is one of the inputs to the National Bureau of Economic Research (NBER) in determining recessions. The NBER is the official arbiter of recessions.

Expect More Inflation Everywhere

Biden is doing everything humanly possible to stoke inflation with EV mandates, natural gas mandates, union pandering, student debt forgiveness, and regulations, some of which is blatantly unconstitutional.

Oil Price Tops Highest Level Since Summer of 2022, What About the SPR?

$WTIC West Texas Intermediate Crude chart courtesy of StockCharts.Com, yesterday’s close, annotations by Mish.

Please note Oil Price Tops Highest Level Since Summer of 2022.

Minimum Wage for Fast Food Workers Jumps 30% to $20 Per Hour in California

Also note the Minimum Wage for Fast Food Workers Jumps 30% to $20 Per Hour in California

The UAW is on strike for massive wage and benefit increases, and more strikes are on deck in other places. Given stagnant productivity, these wage hikes are very inflationary.

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