Tuesday, August 03, 2004

Like a bomb on Broadway, the reviews on June's economic activity just keep getting worse.
Consumers slashed their spending in June by the largest amount in three years as high energy prices took a toll on their wallets and made them more cautious buyers.

The Commerce Department reported Tuesday that consumer spending dropped by a sharp 0.7 percent in June from the previous month. The retrenchment came after consumers splurged in May, ratcheting up spending by a strong 1 percent.

Americans' incomes rose by 0.2 percent in June, down from a solid 0.6 percent increase the month before.

The figures are not adjusted for price changes.
If the Associated Press won't do it for you, the General will.

Per the BEA report, real disposable personal income in June rose 0.009%. I'm not kidding. Real per capita disposable personal income didn't even fare that well, changed -0.07%. With stagnant or falling incomes, Americans actually took the hint -- miracle of miracles! -- and cut back on their spending (hence the big headlines), at the same time pushing the savings rate up to 2.0%, the highest level in almost a year.

While the business pages are lamenting the fall in spending or writing it off as a blip on the screen, shouldn't we be glad that consumption is more in line with income? Nominally, wages and salaries actually fell in June: -0.02%. In real terms wages and salaries were down 0.27% in a single month. Annualized that's a 3.25% fall!

Profits are soaring, wages are tanking (even nominally!) and all the press cares about is when John and Jane Public are going to get back into the auto showroom?


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