Real (inflation-adjusted) consumer spending rose 0.4 percent in June. Real disposable income rose 0.2 percent.

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Personal Income and Outlays from the BEA, annotations by Mish.

The BEA’s Personal Income and Outlays report for June shows consumers picked up the pace of spending in June.

Key Income and Spending Points

• Disposable (after tax) Personal Income (DPI) rose 0.3 percent in June.
• Adjusted for inflation, Real DPI rose 0.2 percent.
• P:ersonal Consumption Expenditures (PCE) jumped 0.5 percent in June.
• Adjusted for inflation, PCE rose 0.4 percent, twice as much ass Real DPI.
• Real means adjusted by the PCE price indexes as measured by the BEA.

Price Indexes

• The PCE price index and Core PCE (excluding food and energy), both rose 0.2 percent in June.
• Compared to a year ago, the PCE price index rose 3.0 percent.
• Compared to a year ago, the Core PCE price index rose 4.1 percent.

Real Personal Consumption Expenditures

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PCE data from the BEA, chart by Mish.

Real PCE goods peaked in March of 2021. All of the growth in consumer spending for 27 months is due to an increase in demand for services.

Real Income and Spending Billions of Chained Dollars

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The focus on real rather than nominal income and spending is due to the fact that inflation-adjusted income and spending are inputs to real GDP.

The three rounds of fiscal stimulus, two under Trump and the last big one under Biden are clearly visible in the above chart. The next chart provides a better look at the stimulus.

Personal Current Transfer Receipts

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Personal Current Transfer Receipts (PCTR) data from the BEA, chart by Mish.

Free Money

Personal Current Transfer Receipts are income from which no services were performed. Medicare, Medicaid, food stamps, Social Security, and three rounds of free money fiscal stimulus during the Covid pandemic are examples.

When you hand out sudden, massive, amounts of free money, expect inflation. And that is just what happened.

The free money rolls on. Prior to the pandemic PCTR was $3.2 trillion, annualized. It’s now $4.1 trillion.

Real PCTR was $2.9 trillion and is now $3.2 trillion. Thanks to inflation, free money does not buy as much as it used to. Fancy that.

Real Disposable Personal Income

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Real Disposable Personal Income from the BEA, chart by Mish

If we take away the free money, the above chart shows what’s left.

The National Bureau of Economic Research (NBER), the official arbiter of recessions, excludes free money in its determination of recessions.

Real Personal Income Excluding Transfers was $14.415 trillion in February of 2020. It’s now $14.754 trillion. That’s a total rise of 2.4 percent over 40 months.

Supposedly, the economy is humming and a soft landing is on the way. Sorry, I don’t buy it. Free money has papered over a lot of stuff.

Real GDP Beats Expectations, Rises 2.4 Percent in First Estimate for 2023 Q2

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GDP and GDI data from the BEA, chart by Mish

Yesterday, I reported Real GDP Beats Expectations, Rises 2.4 Percent in First Estimate for 2023 Q2

GDP and GDI Chart Notes

• Gross Domestic Product (GDP) and Gross Domestic Income (GDI) are two measures of the same thing.
• GDI numbers are not available for the initial estimate for the quarter by the BEA.
• Real Final Sales is the bottom line estimate of GDP. The difference between GDP and RFS is inventory adjustment that nets to zero over time.

GDI for 2023 Q2 is not yet available. But GDI for the prior two quarters was -1.8 percent and -3.3 percent respectively.

Income does not match GDP. Which one do you believe?

Beware the Huge Negative Lag Impact of Three Rounds of Covid Stimulus

Meanwhile, please Beware the Huge Negative Lag Impact of Three Rounds of Covid Stimulus

Payback for three massive rounds of free money is on the way.

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