FedUpUSA

Commentary On Today’s Economic Data

Personal Income And Spending – January 2012

Hmmm… look what the cat dragged in!

Personal income increased $37.4 billion, or 0.3 percent, and disposable personal income (DPI) increased $14.1 billion, or 0.1 percent, in January, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $23.2 billion, or 0.2 percent.  In December, personal income increased $60.2 billion, or 0.5 percent, DPI increased $48.3 billion, or 0.4 percent, and PCE increased $3.2 billion, or less than 0.1 percent, based on revised estimates.

Real disposable income decreased 0.1 percent in January….

So PCE went up faster than DPI did eh?   Urp.

But there’s a crapload of hair on this number, specifically:

The January change in disposable personal income was affected by several special factors. Personal income in January was boosted by pay raises for federal military personnel and cost-of-living adjustments to government social security benefits.  Personal income in January was reduced by the expiration of refundable tax credits within “other” government social benefits to persons, by annual adjustments to personal contributions for government social insurance (a subtraction in the calculation of personal income), and by lump-sum social security benefit payments that had boosted December personal income.  Personal current taxes, which are a subtraction in the calculation of DPI, were boosted in January by federal net nonwithheld income taxes.  Excluding these special factors, which are discussed more fully below, DPI increased $19.4 billion, or 0.2 percent, in January, following an increase of $41.3 billion, or 0.4 percent, in December.

Oh yeah this makes it fun to figure out what reality is.  Let’s see if there’s anything interesting inside.

Personal current transfer receipts decreased $3.6 billion in January, in contrast to an increase of $13.8 billion in December.  Within personal current transfer receipts, “other” government social benefits to persons decreased $14.9 billion in January, in contrast to an increase of $1.5 billion in December.  The January change in “other” government social benefits to persons reflected a decrease of $13.6 billion due to the expiration of the Making Work Pay refundable tax credits.Government social benefits for Medicaid decreased $7.8 billion in January, in contrast to an increase of $0.2 billion in December.  Government social benefits for social security increased $20.3 billion in January, compared to an increase of $9.6 billion in December.  The January change reflected 3.6-percent cost-of-living adjustments (COLAs) to social security benefits and to several other federal transfer payment programs.  Together, these COLAs added $30.2 billion to the January increase in government social benefits to persons. Partly offsetting the effects of the COLAs on social security benefits was a reduction in lump-sum payments, which had added $7.1 billion to December benefit payments; the December benefit payments resulted from a recalculation of the earnings base underlying the benefits for recent retirees.

And before someone says that “tax receipts are up and this is good!” let’s dissect that too:

Contributions for government social insurance — a subtraction in calculating personal income — increased $9.6 billion in January, compared with an increase of $3.8 billion in December.  The January increase reflected increases in both employer and personal contributions for government social insurance.  As noted above, employer contributions were boosted $4.1 billion in January by increases in unemployment-insurance tax rates and in the social security taxable wage base.  The January increase in personal contributions for government social insurance reflected increases in the monthly premiums paid by participants in the supplementary medical insurance program (Medicare B) and in the social security taxable wage base; together, these changes added $1.6 billion to the January increase.

Well, not most of it anyway.  Most of the increase was in fact increases in tax rates and the cap for Social Security tax.  Oh well.

The net on this?  The savings rate decreased by 0.1%, showing that once again net-on-net Americans are getting poorer, not wealthier.  That is, they’re spending more in real terms than their incomes are rising.

And for the second year running, PCE increases exceeded DPI increase; 1.3% for DPI as opposed to a 2.2% increase in PCE.  That is, spending is going up faster than disposable personal income, meaning that contrary to the pontifications on the Tee-Vee the consumer is not de-levering.

We’ll see if any of the so-called “mainstream media” sites report this little inconvenient fact.

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Jobless Claims: Meh

And here come the claims numbers!

In the week ending February 25, the advance figure for seasonally adjusted initial claims was 351,000, a decrease  of 2,000 from the previous week’s revised figure of 353,000. The 4-week moving average was 354,000, a decrease of 5,500 from the previous week’s revised average of 359,500.

Eh, nothing here that excites.  How’s the big table look?

Answer: Unch, basically.

We wait for next week….

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ISM MISS: 52.4

That ain’t good….

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. “The PMI registered 52.4 percent, a decrease of 1.7 percentage points from January’s reading of 54.1 percent, indicating expansion in the manufacturing sector for the 31st consecutive month. The New Orders Index registered 54.9 percent, a decrease of 2.7 percentage points from January’s reading of 57.6 percent, reflecting the 34th consecutive month of growth in new orders.

The problem is that people were looking for an increase.  NOT!

Orders, production, employment, and deliveries were all down, although all except deliveries were over 50.  Exports and imports were both up, which is good, but the rest, not so good.  The only commodity reported down in price was natural gas; everything else is going up, but nothing is reported as being in short supply other than hard disks (hangover from the floods, I suspect.)

The take-away from this morning’s numbers: Pass-through on costs and the lack of actual net income is pushing through the system.  This will impact GDP and the government’s ability to play “prop job” is running out.

This is looking like it will play more-or-less as I expected; demand destruction is next up for recognition and the open question now is how long it will be before the market recognizes this and stock prices do their best base-jump imitation.

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The Market-Ticker

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