Monday, June 28, 2004

According to AP, the consumer spending numbers released today means it's all coming up roses.
Consumers -- the lifeblood of the economy -- boosted their spending in May by the largest amount in more than two years, an encouraging sign for the recovery's strength.

The Commerce Department reported Monday that consumer spending rose by a sizable 1 percent, a considerable pickup from the 0.2 percent increase registered in April. The increase in May was the largest since October 2001, when spending rebounded with gusto after being depressed by the Sept. 11 terror attacks.

Americans' incomes, meanwhile, went up by a strong 0.6 percent in May for the second straight month. The growth in incomes in the last two months was especially heartening because that powers spending in the future. The income and spending figures are not adjusted for price changes.
Well, there's a nasty bug on our rose of happy news for the day -- "not adjusted for price changes". If one does adjust for price changes, suddenly things don't look so rosy.

Disposable personal income in May rose 0.6%, but real disposable personal income didn't rise one iota in May -- 0.0% change. Of course stagnant income is not about to stop Super Consumer! Personal consumption expenditures rose 1.0% in nominal and 0.4% in real terms. Durable goods consumption in particular shot up a big 1.7% in real terms. With all the overproduction in this sector, that's good news for the battle against deflation. On the other hand, real durable goods consumption still hasn't recovered to its recent high of December 2003.

More consumption without more income -- it is the American Way!


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