Personal Income and Savings: The Double Whammy

by: Tyler Durden

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