Income Declines But Spending Up as Stimulus Runs Out

Mish

Real Disposable Income Declined but Spending Rose in August

Personal Income and Outlays 

The Personal Income and Outlays, report for August 2020 shows increasing stress on consumers. 

Real PCE vs Real DPI 2020 Detail

Reall PCS vs Real DPI for August 2020 Detail

Increasing Consumer Stress

Personal Income and Outlays for August 2020

Personal income decreased 2.7 percent while consumer spending increased 1.0 percent in August.

Real disposable income declined 3.5% while real spending rose 0.7%.

Stimulus Runs Out

The Covid $600 stimulus checks ended July 25.

The $300 stimulus checks ended September 5. 

For details, please see Trump's $300 Lost Wage Assistance Benefit Ended in 10 States

Fiscal stimulus has has run its course. 

Mish

Comments (30)
No. 1-9
PecuniaNonOlet
PecuniaNonOlet

32 days till election. While I continue to be employed, my bank accounts keep going up, I dont have anything to spend money on. My main expenses were travel and leisure, something I cant do with the planet shutdown. And with working from home, no need to buy anything other than food.

14 days till Boris Brexit Bonanza.
Mass layoffs begin today.

Eddie_T
Eddie_T

I finally ran my PPP account to zero.....Now I get to see if forgiveness is real. I understand it's been a difficult path to negotiate so far. I'm looking to get my documentation done in the next couple of day and apply. We shall see.

Bam_Man
Bam_Man

Luckily in Amerika, one doesn't need income in order to be able to spend.

Herkie
Herkie

What could possibly account for this?

I just came back from Whalemart and they FINALLY have a decent stock of toilet paper and not a day too soon either. But is also now $15 where it was $9 last year. Soon it will be cheaper to use dollar bills. Had to stop and buy a carton of cigarettes also, they were $60.99 in April, today $68.87, a haircut, from $12 at SuperCuts in January to $18 now. Gas for my car is now back to $3, hamburger is double what I was paying at the start of the year, we in Florida have been told to prepare for towering increases of 20% and more for car insurance on our renewal dates.

Incomes can stay the same but if the prices for the things you must buy are going up by double or even triple digits then that will show up as increased spending even though you might be buying less.

Lance Manly
Lance Manly

Note core PCE y/y is on a relentless march, so the fed is going with zero rates for years because we are .4% behind the devaluation of out money?

PCE, excluding food and energy 0.9 1.0 1.1 1.4 1.6

Carl_R
Carl_R

That's a shocking graph. Normally in a downturn, personal income falls, or at least, stops rising. They gave so many benefits out that personal income had a massive spike upwards, even as spending dropped hard. Wow. I've never seen anything like that before. No wonder the stock market is up. All those saving had to affect a number of things. I presume personal debt dropped a lot, too.

Jojo
Jojo

Speaking of stimulus funds "running out", I wonder how many others in the financial industry are going to get caught red-handed in camming government funds meant for businesses?

JPMorgan Finds More Than 500 Workers Got U.S. Virus Relief Funds
September 30, 2020, 5:35 PM EDT

  1. Internal review found dozens shouldn’t have sought EIDL cash
  2. The figures show the scope of a probe that jolted the industry

Salmo Trutta
Salmo Trutta

Say's law ("demand creates its own supply) has been denigrated:

“…a product is no sooner created than it, from that instant, affords a market for other products to the full extent of its own value.” -- Jean Baptiste Say, “Of the Vent or Demand for Products” A Treatise on Political Economy (4th ed.), translated from the French by C .R. Prinspe (Philadelphia, 1830), Ch. 15.
Chairman Jerome H. Powell has had a negative outlook:

Powell said: “My sense is that more fiscal support is likely to be needed." Powell warned that “overall activity remains well below its level before the pandemic and the path ahead remains highly uncertain.”