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Personal Income Drops, Personal Saving Rate Slides From 6.2% To 4.6%
More details on yet another "consumer health" data point that had seen artificial "inflation" recently, only to revert back to its new, normal, trendline. As the BEA reports:
The June change in personal income reflects selected provisions of the American Recovery and Reinvestment Act of 2009, which boosted personal current transfer receipts in May much more than in June. Excluding these receipts, which are discussed more fully below, personal income decreased $7.8 billion, or 0.1 percent, in June, following a decrease of $2.5 billion, or less than 0.1 percent, in May.
As a result of this:
Personal income decreased $159.8 billion, or 1.3 percent, and disposable personal income (DPI) decreased $143.8 billion, or 1.3 percent, in June, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $41.4 billion, or 0.4 percent. In May, personal income increased $155.1 billion, or 1.3 percent, DPI increased $168.7 billion, or 1.6 percent, and PCE increased $9.0 billion, or 0.1 percent, based on revised estimates.
Additionally, wage deflation shows no signs of abating:
Private wage and salary disbursements decreased $28.6 billion in June, compared with a decrease of $11.3 billion in May. Goods-producing industries' payrolls decreased $11.1 billion, compared with a decrease of $10.9 billion; manufacturing payrolls decreased $6.7 billion, compared with a decrease of $8.4 billion. Services-producing industries' payrolls decreased $17.5 billion, compared with a decrease of $0.4 billion. Government wage and salary disbursements increased $2.8 billion, compared with an increase of $4.3 billion.
Most notably, the personal saving rate declined by over 1.6% in just a month. This is relevant as the consumer isn't levering up: savings exhaustion is likely coming at the expense of paper profits in Schwab and 401(k) accounts. Unless the Ponzi can be maintained in perpetuity, when the house of cards falls, the doulbe whammy from savings increase will have a dramatic adverse impact on the economy. Bottom line: another one-time plug to Q2 GDP.
Source: Bureau of Economic Analysis
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All is okay. Team Barry-O will help us spend our way out of bankruptcy somehow.
> Team Barry-O will help us spend
> our way out of bankruptcy somehow.
Shameless plug... but here's the Biden "we have to spend money to keep from going bankrupt" video.
http://www.briefing.com/Investor/Public/Calendars/EconomicReleases/incom...
PCE slowly creeping up positive slope
debt repayment is savings, but the other way around: in the old times people first saved then spent, nowadays they first spend, then save to pay back with interest. if you want, call it negatively amortized savings :)
I have only 4 homes listed for sale and 2 have dropped out of escrow in the past 3 weeks because the buyer lost his job. Prior to this I have rarely if ever had this happen.
I am selling an Apt Building in Orange County CA where net income dropped from $3M a year in 2007 to $1M for the first 6 months. The debt service is about the same as the net income.
You've heard about that building in Ft. Meyers with one resident, right? I was in Irvine a couple weeks ago and a friend pointed out this high-rise development off the 405 (I'm pretty sure by Jamboree) where there isn't a single tenant.
Said the buildings were all done and people were meticulously maintaining the landscaping but nary a soul. Apparently there is this one sales lady who works in the whole complex, must be the lonliest job in the world.
Not earth shattering I know, but it'd be cool if you knew what I was talking about.
Savings drop came from people who had stopped paying their mortgages and credit cards who now have been foreclosed upon and must start paying rent.
Or from people who have paid off their CC debt, and have finally saved up enough for an emergency fund.
How much of the drop in savings is attributable to the purchase of hard assets now buried under the dog's house?
The savings rate may be nonsense as paying back debt is considered savings too, some consumers have just quit paying their bills and maybe for a very good reason, they are starting to relize that the whores in goverment has thrown them under the bus for the banking pimps.
Screw'em
"and maybe for a very good reason"
What do you mean 'maybe'?!?
we ought to create a citizen's union for a free
america that unites in "not paying their mortgages"
Let them have all the damn houses. I will laugh.!!
... gotta love the pending home sales boorah , what percentage of those offers are "short sale" offers ? I would guess upwards of 80% since the only buyers out there are bottom fishing. The percentage of short sale offers that actually close is about 30% .
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The percentage of short sale offers that actually close is about 30% .
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Where did you get that data and what is the rationale? Is the problem that short sales can't get appraised sufficient to qualify for mortgage?
As a member of 3 Multiple listing services. 30% is an accurate number. The banks are allowing people to live in homes rent free and eventually either sell short sale or foreclose. When they foreclose they sell the home within 45 days for a price within 5% of the short sale offers.
Dig deeper into the report. The spending upbump was higher gasoline prices. All powerful oil yet again starts its chokehold.
Yeah. Thanks Ben, not only have Americans been crushed with falling home values and unemployment, but now they can pay 2X what they were paying a few months ago for oil, thanks to your printed money.
Such logic from you guys. Answer this- I purchased 12 cases of beer on sale for $ 100. Prior to the sale, this much beer was $ 200. Does that mean I saved $100? Also, if I fail to pay my credit cards because I need to feed my family, does that make me a deadbeat?
It makes you a drunk deadbeat.
+1
We have all been conditioned to believe that not
paying our bank bills makes us a deadbeat. I
contend that whatever our government says merely
allows them to manipulate "we the sheep". We have
been too dumb and lazy to stand up and take our
country back. We have falsely believed that either
party is in this for the people. Effectively, we
have no voice. It is absolutely time for a
political revolution of massive proportions. The
question is how? The most efficient and effective
non-biased media can be established through a
"U-Tube" style media. whose with me?
It's too hot here in Phoenix for a revolution.
Can you pick a cooler time of year, then I'm IN!
I read the summary as "Personal income decreased, personal expenditures increased" followed by more decreases in private sector economic activity and expanding government payrolls.
How can the savings rate possibly sustain a net positive?
I've come to terms with the notion that the numbers are just numbers with no basis in reality. So many people have agreed to pretend I don't think there will ever be a day of reckoning.
Yeah, this will be the first year in my career that I will be making less than the previous year. It doesn't exactly make me want to go out and spend.
The decline in personal saving rate in June is interpreted here as "savings exhaustion likely coming at the expense of paper profits in Schwab and 401(k) accounts"
However, it could also be interpreted as the consumer being more resilient and willing to spend despite bad economic times, no?
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However, it could also be interpreted as the consumer being more resilient and willing to spend despite bad economic times, no?
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No. Because the personal spending uptick was all higher gasoline prices -- largely a necessity. There is no manifestation of resilience when you have to be somewhere and fill your tank to get there.
Bilderberg's plan is right on target: Prop-up the markets with Goldman's help via Gov., get all the suckers back into the markets, then pull the plug. This way they can start their one world agenda. They need bankrupt investors to obey....I love my savings account and selling puts way out of the money (collecting free cash every month) on Goldman stock. Thanks Goldman for free rent....lol...
Subjectively, things do seem a little better compared to last winter, but I would hesitate to make the same favorable judgment when the comparison is made relative to the same period a year agHereford example, there is more traffic on the roads here, but truck traffic on area interstate freeways remains thin. I think we are going through a seasonal improvement in some numbers, at the very least in second derivative figures, but with the overall trend continuing down, which should be evident by January. My guess is that the administration has about six months to get a steady heartbeat going; shocking the corpse with one-off cash-for-clunkers programs can only go so far both economically and psychologically.
$800 billion goes a long way. Masturbate, rinse and repeat.
Most notably, the personal saving rate declined by over 1.6% in just a month.
Tyler,
Market-Ticker states that personal savings is not actually savings but people paying down debt.
Does this decrease in the savings rate indicate that the consumer is running out of money to service debt?
Once they run out of savings the economy is screwed. I still can believe the fed counts savings as debt service payments.
this is really important -- it may reflect increasing velocity of money, or else it may reflect the 16.4% (and rising) U-6 figure. perhaps both.
I notice you didn't bother to note that they raised the previous savings rate by 1%.
From 1995-2008 inclusive.
Somehow, normal people may feel that overshadows the 1-month revision breathlessly noted here.
Well, at least the intellectually honest people.
This is something I wrote to friends. Note in a consumer based economy the facts above are not compatable with a higher stock market.
Your income continues to drop, but thanks to easy money from the fed and manipulated markets the wall street bonus culture continues. they are keeping well ahead of inflation thanks to your easy tax dollar. don't forget you've got to pay the money back that they are borrowing to prop the market up at a higher interest rate than they do!!!!! Yes folks that is your lovely governments plan. Screw you as much as they can get away with. squander all the resources left while you are going to be eating dog food in retirement. welcome to the Obama, Bernake, summers, Geithner, plan. If you don't think they are traitors something is wrong with you!!!
yesterday I showed you how the fed games the markets for the bankers to ensure profits. Cuomo showed you what percent of profits go to bonuses (even when they are loosing money). Yes folks your tax dollar is being directly transferred into bankers pockets. Of course it is all to help us.
I hope by this time you don't believe a word of what they are saying. Thank god my income is falling ben, while at the same time you gut the dollar and caue inflation. what would I do without you tranferring my savings into bankers pockets. Yes you are my hero!!!!
U.S. Incomes Fall 1.3%, Biggest Drop in Four Years (Update1)
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By Shobhana Chandra
Aug. 4 (Bloomberg) -- U.S. personal incomes tumbled 1.3 percent in June, more than forecast and the biggest drop in four years, signaling that consumer spending will take time to recover.
The decline partly reflected the unwinding of one-time transfer payments from the Obama administration’s stimulus plan, which boosted incomes 1.3 percent in May, figures from the Commerce Department showed today in Washington. Spending rose 0.4 percent in June as prices climbed. Adjusted for inflation, purchases fell 0.1 percent, the report showed.
The worst economic slump in seven decades eased last quarter as government spending programs started to take hold, underscoring forecasts the recession will end by the end of the year. The recovery is likely to be muted as job losses and falling home values cause Americans to boost savings and limit spending, which accounts for about 70 percent of the economy.
“We don’t see the consumer coming back strongly,” Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, said before the report. Americans “are still nervous. They know their personal finances will be stretched.”
Stock-index futures, which had fallen earlier in the day, remained lower and Treasuries stayed higher. Contracts on the Standard & Poor’s 500 Stock Index dropped 0.7 percent to 994.10 at 8:34 a.m. in New York. Yields on benchmark 10-year notes dipped to 3.62 percent from 3.64 percent late yesterday.
Economists’ Forecasts
Economists forecast personal income would fall 1 percent after a previously reported 1.4 percent gain in May, according to the median of 75 estimates in a Bloomberg News survey. Projections ranged from an increase of 1 percent to a drop of 1.6 percent. June’s decrease was the biggest since January 2005, the month after Microsoft Corp. sent out a special dividend.
Spending was projected to rise 0.3 percent for a second month, according to the Bloomberg survey.
Excluding the effects of the stimulus plan, incomes would have dropped 0.1 percent in June after no change the prior month, according to Commerce. Wages and salaries decreased 0.4 percent in June, the ninth drop in 10 months.
Today’s report showed price increases in June were smaller than in the same period last year. The inflation gauge tied to spending patterns dropped 0.4 percent from June 2008, the biggest decrease since records began in 1960.
Fed Gauge
The Federal Reserve’s preferred gauge of prices, which excludes food and fuel, increased 1.5 percent from a year earlier, the smallest gain since December 2003.
The drop in incomes caused the savings rate to fall to 4.6 percent from a 14-year high of 6.2 percent in May.
Adjusted for inflation, spending dropped 0.1 percent following little change in May.
Inflation-adjusted spending on durable goods, such as autos, furniture, and other long-lasting items, dropped 0.2 percent in June after rising 1.2 percent in the prior month.
Car sales may get a boost this quarter from the government’s “cash-for-clunkers” program, which offers as much as $4,500 for trading in older, less fuel-efficient vehicles. Ford Motor Co.’s sales rose in July for the first month since 2007. Purchases for the industry jumped to an 11.3 million annual pace last month, the highest level since September.
Price-adjusted purchases of non-durable goods decreased 0.4 percent after falling 0.1 percent, today’s report showed.
Services Spending
Spending on services, which account for almost 60 percent of all outlays, was little changed.
Consumer spending fell last quarter at a 1.2 percent pace, and the gain in the first quarter was revised to 0.6 percent, smaller than previously estimated, Commerce figures showed last week. Spending has fallen 2 percent since its peak at the end of 2007, the deepest retrenchment by consumers since 1980.
The job market continues to cloud the outlook for spending. The unemployment rate is projected to surpass 10 percent by early 2010, according to a Bloomberg survey. A report from the Labor Department in three days is forecast to show payrolls fell by 325,000 in July following a drop of 467,000 the prior month.
Consumers are reluctant to spend on much beyond necessities. MGM Mirage, the biggest casino owner on the Las Vegas Strip, reported a second-quarter loss as gambling revenue dropped. Las Vegas-based MGM slashed hotel room rates to attract tourists after companies canceled conferences.
“The operating environment remains challenging,” Chairman and Chief Executive Officer Jim Murren said on a conference call yesterday. Even so, “we see extremely positive signs, especially as we go into 2010.”
To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
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