Personal income increased $133.2 billion, or 1.0 percent, and disposable personal income (DPI)
increased $78.3 billion, or 0.7 percent, in January, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $23.7 billion, or 0.2 percent. In December, personal income increased $56.6 billion, or 0.4 percent, DPI increased $48.5 billion, or 0.4 percent, and PCE increased $56.5 billion, or 0.5 percent, based on revised estimates.
The problem is that this didn’t come from actual earnings:
Contributions for government social insurance — a subtraction in calculating personal income — decreased $94.9 billion in January, in contrast to an increase of $2.5 billion in December.
That’s the 2% decrease (temporary, right? Bahahaha) in FICA taxes. And it was most of the “increase” in income. There was an offset in unemployment insurance costs, but this was where most of the “gains” came from.
What’s disturbing through is that this “gain” didn’t pass through to spending. In fact, ex-inflation spending actually dropped.
Personal outlays — PCE, personal interest payments, and personal current transfer payments — increased $22.1 billion in January, compared with an increase of $54.4 billion in December. PCE increased $23.7 billion, compared with an increase of $56.5 billion.
So spending increased by far less than it did in December. Hmmm….. looks like that “tax decrease” didn’t go anywhere – it simply offset higher food and gasoline prices, effectively shifting that inflation onto the Federal balance sheet in the form of more debt.
That’s not going to work in the intermediate term.
Real PCE — PCE adjusted to remove price changes — decreased 0.1 percent in January, in contrast to an increase of 0.3 percent in December.