The Real Income and Spending report for December comes out on Friday, with GDP out on Thursday. This is an advanced look at income. I added a new column for the November data.

Real Disposable Income (DPI) and Real Personal Consumption Expenditures (PCE) data from the BEA, chart by Mish

The word "real" means inflation-adjusted. It's real income and spending that are inputs to GDP.

Transfer payments are redistributions of money for which there are no goods or services exchanged. Social Security, Medicare, Medicaid, and food stamps (now called SNAP) are examples of transfer payments.

I added Real DPI Less Transfer Payments to the chart because that is what the NBER uses as an input to determine recessions.

November Highlights 

• Real DPI: 0.3 Percent
• Real DPI Less Transfer Payments: 0.3 Percent
• Real PCE: 0.0 Percent

Estimating December PCE

The Bloomberg Econoday consensus for PCE is -0.1. I expect it will be even lower and/or the BEA will revise November lower as well. 

My expectation is based on December retail sales.

December Was Another Retail Sales Disaster, Even Worse With Negative Revisions

Retail sales from commerce department, chart by Mish

Key Points 

• Advance estimates of U.S. retail and food services sales for December 2022, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $677.1 billion, down 1.1 percent (±0.5 percent) from November.
• The October 2022 to November 2022 percent change was revised from down 0.6 percent (±0.5 percent) to down 1.0 percent (±0.2 percent). 

Not only was December a disaster, the commerce department revised November from -0.6 percent to -1.0 percent.

I expect the BEA will do the same making November PCE negative.

Month-Over-Month Advances and Declines

• Food Service: -0.9 percent
• Food Stores: +0.0 percent
• Gas Stations: -4.6 Percent
• General Merchandise: -0.8 Percent
• Excluding Motor Vehicles and Gas: -0.7 Percent
• Excluding Motor Vehicles: -1.1 Percent
• Nonstore (Think Amazon): -1.1 Percent
• Motor Vehicles: -1.2 Percent
• Department Stores: -6.6 Percent

Real spending fell off the cliff starting November and accelerated in December.

When a Recession Will Start

Lacy Hunt at Hoisington Management and I discussed the timing the recession. We both think a recession has started. 

Although DPI minus transfer payments may be higher, real PCE is a strong favorite to be negative.

The NBER, the official arbiter of recessions looks at real personal income less transfers, nonfarm payroll employment, real personal consumption expenditures, wholesale-retail sales adjusted for price changes, employment as measured by the household survey, and industrial production. 

Industrial production, retail sales, full time employment are negative. I expect negative revisions to jobs and income. Even without jobs, if this data holds, we are in recession. 

For discussion, please see A Better Definition of Money and Lacy Hunt's Thoughts on When a Recession Will Start

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