CPI versus Personal Spending

Personal income grew in April at twice the rate of spending, boosting the savings rate to the highest level since last summer. According to the Commerce Department, Spending advanced 0.3%, while Personal income increased by 0.6% last month. Both numbers were 0.1%, ahead of expectations.

Let’s break it down:

The Good News: This increase in income was the largest monthly gain since November’s 0.6% advance. Disposable personal income, or income after taxes, climbed 0.5%, following a 0.4% advance in March.

The Bad News: Spending on durable goods, big-ticket items such as cars and appliances, rose 0.8%; Outlays on nondurable items such as food and clothing slipped 0.1%. Look for rising interest rates to negatively impact durables number going forward, while higher inflation eats into spending (goods purchased will have the ~same $ amount, but lower units sold).

Spending!
personal_consumption_4.04

The Ugly News: Inflation. A price index for personal consumption expenditures is rising, most especially due to food and energy costs. Beware the news releases that focus on ex- food + energy, as they are foolish knaves sent to waste your time.

We all wish our “personal-consumption expenditures were actually “less food and energy” — but such is life on planet Earth. A boys gotta eat and get to work. That takes (duh) FOOD AND ENERGY.

The Really Ugly News: University of Michigan consumer-sentiment index dropped to 90.2 in May; Economists were looking for 94.4. Ouch.

Consumer Sentiment went south in May — Iraq, Inflation, Gas topping $2 — all soured consumers mood.

In sum, wage earners eked out a little more green, but then promptly handed it over to gas station attendants and supermarkets. Consumers weren’t topo pleased with the situation.

Sources:
Personal Income Grows 0.6%, Double the Rate of Spending
WSJ, May28,20048:53a.m.

http://online.wsj.com/article/0,,SB108574734050223927,00.html

Barrons Economic Calendar

http://online.wsj.com/public/page/0,,barrons_econoday,00.html

Data Source: Haver Analytics

Category: Finance

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