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August Savings Rate Rises As Income Outstrips Spending
The BEA has released the August Personal Spending, Income and Savings data: in summary spending rose 0.4% on expectations of 0.3%, and 0.2% previously, income increased 0.5% vs a consensus of 0.3%, and 0.2% previously again. The reason for the biggest advance in income this year, "the
resumption of extended and emergency unemployment benefits." It appears, the only way Americans can see their incomes now grow is when the goverment loosens the socialism spigot. Both the PCE core and deflator came as expected, at 0.1% and 1.5%, respectively. Finally, due to the relatively bigger growth in Income, the savings rate increased slightly from a previously revised 5.7% (5.9% before), to 5.8%. The Krugmanites out there will vomit all over this number, as the last thing, they will say, the economy needs is a consumer who is saving more just as the government's fiscal stimulus hands are tied, and the effects of the existing stimulus are now non-existent.
And an observation on wages:
Private wage and salary disbursements increased $26.1 billion in August, compared with an increase of $25.7 billion in July. Goods-producing industries' payrolls increased $6.7 billion, compared with an increase of $6.2 billion; manufacturing payrolls increased $2.9 billion, compared with an increase of $4.8 billion. Services-producing industries' payrolls increased $19.4 billion, compared with an increase of $19.5 billion.
We have yet to see if this increased wage disbursement will finally translate into actual spending with a lagging effect.
Savings rate:
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Of course income surged. All the people started getting their unemployment checks at the end of July, so they received 4 checks in Aug vs 1 in July.
Its not income growth. Its gov't handout growth.
The funny thing is that the savings rate is really people paying down debt. It's not money they are packing away in a bank account like we normally think of as 'savings'.. as in, savings for a rainy day. No, this is people that are deperately trying to pay down all those 30% interest rate credit card balances before they go into default.
The bolded section explains the reason:
"Purchases rose 0.4 percent for a second month, Commerce Department figures showed today in Washington. The gain exceeded the 0.3 percent increase projected by the median forecast of economists surveyed by Bloomberg News. Incomes were up 0.5 percent, the biggest advance this year, propelled by the resumption of extended and emergency unemployment benefits."
"Supplements to wages and salaries increased $4.1 billion in August, compared with an increase of $3.9 billion in July". Would this represent UE checks?
Seems to be--add more to the EU...
http://money.cnn.com/2010/09/30/news/economy/subsidized_jobs_program/index.htm
It's also possible that the M2 begins penetrating wages. In this case, the inflation could happen sooner than expected. And that would be more threatening for the FED than deflation.
Yes, that could be happening right now
Saving, what does that even mean? Chinese and Indians save 50% of their income. An income which is a tenth of ours. We have no clue what saving means.
That's not true. I jumped into my hummer and drove to the local Wal-mart where I bought an IPad on sale for $100 which was marked down from $300. That's a savings of $200.
Stupid chumps in China burnt up maybe $10 in raw material to make that IPad and got maybe $20 for it which will be worth maybe $5 by the time Bernanke gets through diddling those simple heathens. That's a net loss of $5 for them so it doesn't make any difference what percentage they supposedly "save."
You obviously don't have a PhD in economics from a good university.
Hope to see some analysis on the quality of BEA data.
All economic data going into the Nov election will be " BETTER THAN EXPECTED "
The income numer is more than 50 percent from transfer payments and the chained number ex transfers is DOWN for the 2md month!
To say again look at the cume "savings" and copare it to the debt reductions on consumer and mortgage along with increases in assests per fof. The savings number is an accounting construct rather than dollars. The savings number doesn't reconcile with the householed balance sheet per fof rpeoorted gains or losses in assets and liabiltiies.
ya think people not paying mortgages allows them to 'save' and 'spend' more? i do!
We must commend the government on its highly successful Cash for Drunkards program. It is keeping the brewing and distillery industry afloat!
LOL @ the Krudman cultists. Saving is the LAST thing you do when times are tough. It's so obvious! When you're totally broke and in debt way past your eyeballs, all you need to do is take out another loan (damn the interest rates!) and get out there and buy some stuff! Hopefully you're a patriot and you'll buy a Gubment Motors Chevrolet with a chinese engine, mexican transmission, and canadian sub-components. Built courtesy of your tax dollars of course. Better yet, step up and do the right thing and buy a Volt. You get an awesome range of 60 whole miles on a single charge! The best part? It's only $42,000!! Get out there and spend, idiot serf!! Quit being selfish and saving money! The economy (and my Nobel Prize) depend on it!
This report should be telling. Looking at the composition of the increases in incomes, month-over month the big spike is unemployment and other gov't insurance (60% of the change in total), with these lines contributing to 40% of the total change (SAAR) in personal incomes.
I've asked this before, but does anyone read these goddamn reports? Maybe it's me showing my profession/cards, but for fuck's sake, they even show that month-over-month personal incomes stripped of transfer receipts actually decreased month-over-month. Hell, on an annual basis once you strip away everything else, wages and salaries are, at best, flat. This doesn't even get into their statistical approach of calculating seasonal adjustments, which given the small amounts we're dealing with now could easily distort this number.
It's like I've woken up and people just put their fingers in their ears and stopped thinking all together. Cats and dogs living with each other, complete pandemonium...