American Spending Grows Faster Than Income For The 29th Straight Month

For the 29th month in a row, Americans annual spending grew faster than their incomes as the 'no consequences' new normal rolls on, leaving the savings rate languishing near record lows - even if it did very modestly uptick in May.

Year-over-Year income growth reached 4.0% - the highest since Nov 2015; while YoY spending growth stalled at 4.4%.

Income growth was dominated by private workers seeing another uptick...

On the month, personal incomes grew 0.4% (as expected) - the fastest rate since Dec 2017.

However, for the second straight month, month-over-month spending growth disappointed - rising just 0.2% MoM vs +0.4% expectations.

But the growth in both continues.

The PCE Inflation data came in a little hotter than expected - rising at the fastest since March 2012...

As a reminder, the vast gap between extreme high confidence and extreme low savings rate - a borrow-my-way-to-happiness narrative - has never ended well in the past...

Remember, nothing lasts forever - ask the German soccer team.

 

Comments

MK ULTRA Alpha Hal n back Fri, 06/29/2018 - 09:38 Permalink

The real story is Americans have relied on credit to survive for 29 straight months. This means people are using credit cards to live. It's not just a standard of living issue.

That's over two years of debt spending to maintain the standard of living for a sinking middle class and the other class, the 50% of the people called the "Working Poor".  50% of the American people are now in the bottom rung category of not having $500 to their name for an emergency like a tooth ache, broke down car, basically survival issues. Wages are not keeping up with hyper-inflation. period.

This is further evidence the economy's rebound has a weak leg, and that is the debt driven component. I commented yesterday, if one had the time, review credit card debt by region and cities, it indicates hyper inflation has caused a great percentage of the working poor to use credit cards to survive the inflationary waves of QE, tax cut, massive government spending and offshore capital repatriation.

Inflation is increasing to the hyper-inflation scenario, and  I expect the Fed will be forced to intervene with an even more aggressive policy to combat it. Great turbulence in the economy, politics and geopolitical realities are on the horizon. Predictions of future growth, peace and especially the Fed vs Inflation battle will be difficult because of the future political dynamic of the global trading systems realignment and restructure with the positive result of import/export numbers changing dramatically in favor of the US. 

In reply to by Hal n back

SmilinJoeFizzion Fri, 06/29/2018 - 08:42 Permalink

People walked away from home loans in 2008 when shit hit the fan w/out penalty. Students walking away from loans at record pace.  Now its time to walk away from Citi and Chase.  Because you can!!

MusicIsYou Fri, 06/29/2018 - 08:46 Permalink

See dumbass spend money while another is saving, then watch dumbass go broke, and think the saver with money is corrupt. That's how the story goes.

MusicIsYou Fri, 06/29/2018 - 09:03 Permalink

Today the American population would rather die than to not buy shit, and that is because they're the walking dead that tries to feel alive from buying something frequently.

The Pet Shop Boys made my point fairly accurately.

"Too many shadows whispering voices
Faces on posters too many choices
If when why what how much have you got
Have you got it do you get it
If so how often
Which do you choose
A hard or soft option
(How much do you need)

In a West end town a dead end world
The East end boys and West end girls
In a West end town in a dead end world
The East end boys and West end girls
West end girls
West end girls"

YES, it is a dead end world.

MusicIsYou Fri, 06/29/2018 - 09:17 Permalink

A little something I know about most Americans is that most Americans would rather commit suicide than to not be able to be a glutton. That is a fact not generally known yet, but it is a fact you shall see play out in American society, and considering the skyrocketing suicide rates, I'd say it's already underway.

TacticalTrading Fri, 06/29/2018 - 09:23 Permalink

Just think where spending will be relative to earnings in 10-15 years when all the boomers are no longer earnings money and are spending their Social Security and savings (read: Selling Stocks and Bonds)  

That is when we will finally see the true impact of Obama's 10 Years of ZIRP. 

Chief Joesph Fri, 06/29/2018 - 09:30 Permalink

"....leaving the savings rate languishing near record lows...".  What savings?  Most Americans have no savings, and its the reason why credit card spending is so high, and why Americans are over their heads in debt.  Also, banks do not encourage savings either.  Before the Glass-Steagall act was repelled in 1999, Americans were getting at least 4% on their savings account.  Today, you are lucky to get 0.1% on a savings account, and banks now charge you on that account, if your account falls below the minimum amount set by them.

 

Besides, America now has a "Consumer" economy, and you are suppose to spend-spend-spend your hard earned savings to keep the economy going.  To hell with your own personal welfare and economy.

aztrader Fri, 06/29/2018 - 10:08 Permalink

Use NON-GAAP accounting to make it look like they are spending and not saving at all.  When in fact, the spending is higher because prices are higher and savings is lower because most people are buried in debt and barely making their monthly installments before they lose everything......

Bemused Observer Fri, 06/29/2018 - 13:01 Permalink

A lot of that spending is covering inflation, to be sure. But still, people are not holding on to their money. I sure hope they are stashing some preps, because the idea of so many just WINGING it like that is scary!

I'm one of those 'spenders'. But what I'm actually doing is converting it into some other form that I will then hold onto, like a savings account of sorts.

Basically, the stuff I know I will need, and that I can store, I will purchase now rather than save the money to buy it later when it may cost a lot more, or not even be available. I'd rather buy a few extra pairs of comfortable shoes today, because I KNOW the ones I'm wearing will wear out. Having some extras just means I won't have to go searching for them then. One less thing to worry about.

When things like shampoo, toothpaste and deodorant go on sale, I buy a few and stash them. Again, it is something you WILL need to obtain periodically, why not just obtain a whole bunch at once, and cross it right off your list of recurring purchases?

I have no idea what the dollar in my pocket will be worth 10 years from now, or what it will purchase. The tube of toothpaste that I buy today however, will always BE a tube of toothpaste. So, what would I be likely to do with today's dollar if I were considering these things?

Well, I really hope it's that, and not that Americans just don't give a shit and have decided to drive this thing until the wheels fall off.

. . . _ _ _ . . . Fri, 06/29/2018 - 14:00 Permalink

For the 29th month in a row, Americans annual spending grew faster than their incomes...

The government's been doing that for ages. With that as an example, what else would people do? That's what 'trickle down' really means. Imitate the rich. But you don't have their capital to weather the storms, and you can't print money.