Consumer spending, income drop as inflation accelerates

posted at 3:50 pm on May 27, 2011 by Ed Morrissey

On its face, today’s report from the Bureau of Economic Analysis looks like good news.  It shows personal income rising 0.4% in April, and personal consumption expenditures increasing by the same amount.  However, when the BEA accounts for increased taxes and inflation, the picture looks quite different indeed:

Real DPI decreased less than 0.1 percent in April, in contrast to an increase of less than 0.1 percent in March.  Real PCE increased 0.1 percent in April, the same increase as in March. …

Personal current taxes increased $11.0 billion in April, compared with an increase of $8.3 billion in March.  Disposable personal income (DPI) — personal income less personal current taxes — increased $35.1 billion, or 0.3 percent, in April, compared with an increase of $46.3 billion, or 0.4 percent in March.

Reuters calls the narrow decline in real DPI a “tepid” and modest rise in its report, but notes that inflation has returned — and that means that the second quarter has shown even more weakness in the start than Q1′s 1.8% annualized GDP growth rate:

Consumer spending rose modestly in April, starting the second quarter on a soft note as high gasoline prices continued to squeeze household finances and keep inflation pressures simmering.

They then manage to misreport the real DPI, which is defined by the BEA as “DPI adjusted to remove price changes,” in order to account for inflation:

When adjusted for inflation, spending nudged up 0.1 percent last month after gaining 0.1 percent in March.

No, it went down by “less than 0.1%,” not up.  Inflation on all prices rose 0.3% in April, and in “core” prices by 0.2%.  The overall PCE index has risen 2.2% over the last 12 months, which isn’t a bad rate of inflation if the economy was actually growing significantly.  With a real GDP of 0.6% in Q1 and flatlines in real spending and wages, we’re entering into a mild stagflation cycle, thanks to fuel costs that the recession temporarily kept low.

Suitably Flip has more on these results, which indicate an even weaker Q2 than Q1.

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Consumer spending rose modestly in April, starting the second quarter on a soft note as high gasoline prices continued to squeeze household finances and keep inflation pressures simmering.

I know the wife and I are being very frugal. Gas prices are keeping me from spending anymore than necessary.

Doughboy on May 27, 2011 at 3:56 PM

They then manage to misreport the real DPI, which is defined by the BEA as “DPI adjusted to remove price changes,” in order to account for inflation:

An honest mistake.
Really,…is everything a conspiracy? I think not. Probably just a word processor error.

a capella on May 27, 2011 at 3:59 PM

America will be defeat4ed through the policies and doctrines of a skinny clown.

And, we’re supposed to let this happen. We are supposed to take this on the chin. We’re supposed to lay down and just accept it.

We’re going to go along to get along.

We’re going to throw America and Israel under the bus. Go along to get along.

Key West Reader on May 27, 2011 at 4:00 PM

Stimulus XIX: Government apple carts.

Vashta.Nerada on May 27, 2011 at 4:00 PM

We are also turning inward. Are we, as American Patriots expected to readily accept the Obama plan?

No.

Key West Reader on May 27, 2011 at 4:02 PM

Hitting the poor the hardest, but hey, a few eggs need to be broken to achieve the perfect utopian omelet.

Bishop on May 27, 2011 at 4:03 PM

I know the wife and I are being very frugal. Gas prices are keeping me from spending anymore than necessary.

Doughboy on May 27, 2011 at 3:56 PM

It’s Obama and the democrats that keep my household living as frugally as possible. Although I worry they may come after our savings before long.

bopbottle on May 27, 2011 at 4:04 PM

Stimulus XIX: Government apple carts.

Vashta.Nerada on May 27, 2011 at 4:00 PM

Are these apple carts my new wallet? A way to carry my dollars devoid of purchasing power?

WashJeff on May 27, 2011 at 4:04 PM

But… the GOP wants to talk about Medicare!

faraway on May 27, 2011 at 4:04 PM

For those of you children who never lived through Carter, welcome!

Lanceman on May 27, 2011 at 4:04 PM

No, it went down by “less than 0.1%,” not up.

I think by “spending” they’re referring to “personal consumption expenditure”, which did have a real increase in April of 0.1%, as opposed to “disposable personal income”, which had a real change of 0.0% (the value was negative but rounds to 0.0%).

DKCZ on May 27, 2011 at 4:04 PM

But on the top of the hour news…

… I was told to be happy that gas was down to ONLY $3.99/gal!

/

Seven Percent Solution on May 27, 2011 at 4:06 PM

sesquapiddlesitself will be along to change the subject with snide attacks on the messenger any moment now…

Midas on May 27, 2011 at 4:07 PM

It seems that Reuters has already edited its article, since there is no longer a sentence reading “When adjusted for inflation, spending nudged up 0.1 percent last month after gaining 0.1 percent in March.”, but there is now a sentence reading “But prices rose 0.3 percent, leaving spending up just 0.1 percent and incomes stagnant when adjusted for inflation.”

DKCZ on May 27, 2011 at 4:09 PM

Rising commodity prices isn’t necessarily inflation, it could be plain old Supply and Demand at work. There’s actually alot of evidence for this.

core inflation is the price of everything, across the board increasing along with salaries.

jp on May 27, 2011 at 4:10 PM

Do any of us, who buy gas and groceries, have to be told that inflation has returned?

SKYFOX on May 27, 2011 at 4:10 PM

Over the course of the last two years, I have lost over $100k.

I have lost my retirement.
I have lost my son’s college fund.
I have lost the ability to pay his dental bills.
I have lost my home (well, strategic default)
I have lost my life insurance
I have lost my health insurance
I have lost my faith in our Nation
I have lost my faith in our government
I have lost my .. well, wait. I have not lost my faith in myself. So… FUBO

I have lost evertyhing that I have worked for since I was 22 years old. So FUBO. You’ll not win this battle. Assmunch.

Key West Reader on May 27, 2011 at 4:11 PM

Ed, yours is an obviously flawed and biased (and probably racist) analysis.

None of this can be true.

Obama is President.

catmman on May 27, 2011 at 4:11 PM

But… the GOP wants to talk about Medicare!

faraway on May 27, 2011 at 4:04 PM

Which is a good point.

Medicare is important but there’s plenty more to be hammering Obama about.

They needn’t get so focused on Medicare ‘messaging’ that they forget everything else.

catmman on May 27, 2011 at 4:14 PM

For those of you children who never lived through Carter, welcome!

Lanceman on May 27, 2011 at 4:04 PM

Arhg! Remember the lines? The license plates? Oye, the lines.. in Houston. And everyone had a gas guzzler financed by a local gas station. There was no credit. Taco Bell food was about $5.00 for a burrito. I wish for those days. At least our President was a dunce and not a Marxist Communist hell bent on destroying the Nation.

Key West Reader on May 27, 2011 at 4:14 PM

Can you smell that??? It’s the 1970′s making a comeback, but now more pissed off and aggressive as ever

Oil Can on May 27, 2011 at 4:16 PM

But, I am being told by my local LLL Newspaper and TV station that gas being over $4 a gallon is a good thing cause, well darn it, that is going to conquer global warming as we are putting out less and less evil oil company pollution donchta see? You really just have to open your eyes. Cause like under Bush/Hitler gas prices over $4 a gallon were bad cause it hurt the poor people, but that was different, cause he was making a gazillion dollars profit./

Johnnyreb on May 27, 2011 at 4:17 PM

Recovery Summer II is shaping up nicely. We will all get trimmer from eating less and walking everywhere; Moochelle’s national fitness initiative will show success.

Bishop on May 27, 2011 at 4:17 PM

The prices for everything is so high, especially government services, i.e., fines, fees, utilities, licencing, etc. They think everyone is made of money and are only here to give it to them.

Blake on May 27, 2011 at 4:18 PM

Can you smell that??? It’s the 1970′s making a comeback, but now more pissed off and aggressive as ever

Oil Can on May 27, 2011 at 4:16 PM

Getting up the Hill.

Good memories though. Loved that era.

Key West Reader on May 27, 2011 at 4:18 PM

Recovery Summer II is shaping up nicely.
Bishop on May 27, 2011 at 4:17 PM

Can we have a Summer without a Spring? All I recall is about 3 months of March so far this year in the Midwest.

WashJeff on May 27, 2011 at 4:20 PM

But, I am being told by my local LLL Newspaper and TV station that gas being over $4 a gallon is a good thing cause, well darn it, that is going to conquer global warming as we are putting out less and less evil oil company pollution donchta see? You really just have to open your eyes. Cause like under Bush/Hitler gas prices over $4 a gallon were bad cause it hurt the poor people, but that was different, cause he was making a gazillion dollars profit./

Johnnyreb on May 27, 2011 at 4:17 PM

Are they seriously trying to sell the public on the virtues of $4/gal gas? Outside of maybe San Fran-psycho, who the hell is that gonna play well with?

Doughboy on May 27, 2011 at 4:21 PM

SKYFOX, they have to print those stories for the moochers and looters.

In related news, the LSM needs to adjust your expectations:
http://finance.yahoo.com/career-work/article/112786/unemployment-new-norm-fins

orbitalair on May 27, 2011 at 4:23 PM

Guns fer everyone

Archie Bunker

Key West Reader on May 27, 2011 at 4:23 PM

I have lost evertyhing that I have worked for since I was 22 years old. So FUBO. You’ll not win this battle. Assmunch.

Key West Reader on May 27, 2011 at 4:11 PM

That is a bad 2 years. We need to bring this disastrous presidency to an end next November.

GaltBlvnAtty on May 27, 2011 at 4:24 PM

Key West Reader on May 27, 2011 at 4:11 PM

Sorry to hear all of that. :/

Midas on May 27, 2011 at 4:28 PM

The reason to buy oil, gold, silver futures to hedge against the falling dollar. oh, evil speculator, reaping profits to stay ahead of rising cost. Oh, capitalist profiting in a socialist system.

EliTheBean on May 27, 2011 at 4:28 PM

Pre-PC

LOL

Key West Reader on May 27, 2011 at 4:28 PM

Bring back the Pinto…the lime green one!

Electrongod on May 27, 2011 at 4:29 PM

Can you smell that??? It’s the 1970′s making a comeback, but now more pissed off and aggressive as ever

Oil Can on May 27, 2011 at 4:16 PM

Ya know, if the disco starts rolling out, it might just be the straw that broke the camel’s back.

Midas on May 27, 2011 at 4:30 PM

GaltBlvnAtty on May 27, 2011 at 4:24 PM

Key West Reader on May 27, 2011 at 4:11 PM
Sorry to hear all of that. :/

Midas on May 27, 2011 at 4:28 PM

My ancestors survived the Holocaust. I survived Jimmy Carter. I am absolutely certain that I will survive some knock kneed thin skinned, two bit community organizing antagonist with a GWB inferiority complex; and don’t get me started on his Mooo… oh wait, wife.

Americans are always fine. We always prevail.

Key West Reader on May 27, 2011 at 4:32 PM

And yet here is the headlines in the MSM:

Rising consumer confidence raise stocks

angryed on May 27, 2011 at 4:34 PM

Another campaign commercial ready-made to run against Paddy O’bowma…

Seven Percent Solution on May 27, 2011 at 4:35 PM

..I survived Jimmy Carter. I am absolutely certain that I will survive some knock kneed thin skinned, two bit community organizing antagonist with a GWB inferiority complex; and don’t get me started on his Mooo… oh wait, wife.

Americans are always fine. We always prevail.

Key West Reader on May 27, 2011 at 4:32 PM

God bless your parents, God bless you, and God give those of us who feel the same way you do the strength to throw this Pantload, his broad-beam squeeze, and all of the other crooks in his administration out on their assses next year.

Persevere, old son!

The War Planner on May 27, 2011 at 4:36 PM

Although I worry they may come after our savings before long.

bopbottle on May 27, 2011 at 4:04 PM

The Fed has a policy of debasing the currency. The net effect is to favor people with debt over savers. Coincidentally, the government holds the largest amount of debt.

This government policy has been used to attack the value, if not the dollar amount of your savings, and has been followed ever since Nixon de-linked the dollar from any meaningful standard.

Do not be fooled into thinking that inflation is a function of prices. Inflation is the act of devaluing the currency and rising prices is a trailing indicator of inflation and is often delayed by soft market conditions.

Every time the Fed buys treasuries or increases the money supply, it is committing an act of inflation, it is taking another bite out of your savings,

Laurence on May 27, 2011 at 4:37 PM

Are these apple carts my new wallet? A way to carry my dollars devoid of purchasing power?

WashJeff on May 27, 2011 at 4:04 PM

No, the apple carts are the government jobs program, and the wheelbarrows are the new wallets.

Vashta.Nerada on May 27, 2011 at 4:37 PM

Bring back the Pinto…the lime green one!

Electrongod on May 27, 2011 at 4:29 PM

Tan Pinto’s.

Now, lets talk about them Chevy Vega’s! Woot! Aluminum blocks. Oh, yeah. They drove great… uh.. well no, they didn’t.

I made sure my Mom’s Vega got accidentally washed out into the Atlantic off of Daytona Beach. Uh. Huh.

Key West Reader on May 27, 2011 at 4:40 PM

Key West Reader on May 27, 2011 at 4:32 PM

;)

Midas on May 27, 2011 at 4:42 PM

Ever since the summer of 2008, I have been predicting that Obama was Carter 2.0. I graduated from college in the middle of Carter’s term. He is solely responsible for me shaking off my upbringing (union democrat household) and becoming a conservative. Keynesian economics does NOT work. God Bless Ronald Reagan from pulling us back from the abyss in 1981. I never predicted we would repeat this horrendous mistake in my lifetime and have a Carter 2.0 regime, doubled down on stupid with someone who really hates America in the Oval office.

What has shocked me was the sheer ballsiness of the Dems in Congress gleefully racking up 5.0 TRILLION in extra national debt, and adding 1.6 TRILLION per year to the amount. I didn’t even predict that.

I didn’t predict he would STEAL GM and Chrysler from the bondholders. I didn’t really understand what a community organizer was, but I do now. Insidious occupation, pitting class warfare, with useful idiots eagerly participating. I didn’t really understand ACORN/SEIU and the unholy alliance that they had with each other that enabled them to steal elections.

The drive by media is to blame for this a$$clown being in office. Had they done their job, he never would have made it out of the primary.

We are at the tipping point. We either throw this clown out of the Oval Office next year, or we become a banana republic with the government confiscating all of our income, accumulated wealth, our guns and our freedom.

karenhasfreedom on May 27, 2011 at 4:43 PM

Since almost everyone privately sold or gave away their guns after the big panic {or lost them in a Boating accident}, maybe we all should stimulate the economy with buying some more.

Colbyjack on May 27, 2011 at 4:49 PM

We are at the tipping point. We either throw this clown out of the Oval Office next year, or we become a banana republic with the government confiscating all of our income, accumulated wealth, our guns and our freedom.

karenhasfreedom on May 27, 2011 at 4:43 PM

My concern is that we’ve passed the tipping point, and next year’s election will be far too late.

Midas on May 27, 2011 at 4:51 PM

We are at the tipping point. We either throw this clown out of the Oval Office next year, or we become a banana republic with the government confiscating all of our income, accumulated wealth, our guns and our freedom.

karenhasfreedom on May 27, 2011 at 4:43 PM

Agreed. This is America’s last chance.

GaltBlvnAtty on May 27, 2011 at 4:53 PM

I made sure my Mom’s Vega got accidentally washed out into the Atlantic off of Daytona Beach. Uh. Huh.

Key West Reader on May 27, 2011 at 4:40 PM

My mom had a Vega too….with air conditioning option.
The option was A/C on – forward motion off.
A/C was only good at stop lights…then you turned it off after the light was green to keep the person behind you from honking.

Electrongod on May 27, 2011 at 4:54 PM

We are at the tipping point. We either throw this clown out of the Oval Office next year, or we become a banana republic with the government confiscating all of our income, accumulated wealth, our guns and our freedom.

karenhasfreedom on May 27, 2011 at 4:43 PM

You are brave. And, we have to Unite. Because the future of America is at stake.

Thank you Karen.

Key West Reader on May 27, 2011 at 4:56 PM

I made sure my Mom’s Vega got accidentally washed out into the Atlantic off of Daytona Beach. Uh. Huh.

Key West Reader on May 27, 2011 at 4:40 PM

My dad bought a flesh colored Vega. It was so ugly, none of us wanted to drive it. We talked him into getting it painted blue. That’s right. Earl Scheib $49.95.

Fallon on May 27, 2011 at 5:01 PM

My mom had a Vega too….with air conditioning option.
The option was A/C on – forward motion off.
A/C was only good at stop lights…then you turned it off after the light was green to keep the person behind you from honking.

Electrongod on May 27, 2011 at 4:54 PM

Yeah, A funny time to think about because we prevailed. But with this farking marxist communist clown, i’m not sure how we’re going to deal with this.

WTF. My brothers always say, ‘DON’T FU** WITH MY SISTER”

When are we going to say, “STOP FARKING WITH AMERICANS”

Key West Reader on May 27, 2011 at 5:04 PM

Hooray! Oh, wait, no, the other thing.

rogerb on May 27, 2011 at 5:08 PM

They always hate mens named Earl.

I dunno, I’m thinking about the fuggidol option.

Key West Reader on May 27, 2011 at 5:08 PM

For those of you children who never lived through Carter, welcome!

I lived through Carter. I was young and newly married when the peanut farmer tried to wreck the country. Sorry to say, this is a lot worse. I wake up every morning hoping it has all been a nightmare.

hachiban on May 27, 2011 at 5:14 PM

What’s the misery index nowadays?

The reason to buy oil, gold, silver futures to hedge against the falling dollar.

EliTheBean on May 27, 2011 at 4:28 PM

That’s what I’m doing. And buying food (and gasoline) ETFs too.

petefrt on May 27, 2011 at 5:25 PM

hachiban on May 27, 2011 at 5:14 PM

I lived through Carter too, and yes, this is worse. The question is how much worse will it get before we can reign in these radicals.

petefrt on May 27, 2011 at 5:28 PM

The New Zealand dollar hasn’t been this strong against the U.S. dollar since 1982 (1 NZD = .82 USD). Yet with the high amount of NZ government borrowing and spending, 4pc inflation and next to no economic growth the NZD is weak against almost every other paper currency. Just goes to show you the rate at which your government is debasing the USD.

Americans with all their savings (if there are any savers left) held in USD are especially vulnerable, and if/when the Chinese government allows the market to determine the strength of the yuan then the sh*t’s really going to hit the fan.

FierceGuppy on May 27, 2011 at 5:34 PM

FierceGuppy on May 27, 2011 at 5:34 PM

It’s Øbama’s New World Order, where wealth is redistributed among individuals, power is redistributed among political parties, and influence is redistributed among states.

petefrt on May 27, 2011 at 5:49 PM

I don’t care. Obama is awesome.

ladyingray on May 27, 2011 at 5:52 PM

It’s Øbama’s New World Order, where wealth is redistributed among individuals, power is redistributed among political parties, and influence is redistributed among states.

petefrt on May 27, 2011 at 5:49 PM

And in which Obama simultaneously and intentionally puts our country at further risk and transfers wealth from us to Brazil by preventing drilling here and sending our borrowed money to Brazil for them to drill there.

GaltBlvnAtty on May 27, 2011 at 6:08 PM

Those who wish to blame our economy’s problems on Bush ought to look at unemployment figures when both house and senate were Republican, when Democrats took over the house, when Democrats took over the house and senate. You’ll see unemployment jumped up substantially each time.

Now I wonder why?

Dr. Charles G. Waugh on May 27, 2011 at 8:07 PM

I think the only thing keeping the economy moving along was all the money I spent on leave this months.

hawkdriver on May 27, 2011 at 11:51 PM

Key West Reader

Good Post and Great Attitude, don’t let the but wipes get you down.
My old Grand Pappy always said,

“Keep a smile on your face and a song in your heart: It makes the Bastards wonder what you know they don’t’.”

It works too, I used to drive people nuts, well I still do but now its because I am old and cantankerous.

old war horse on May 28, 2011 at 1:56 AM

We are also turning inward. Are we, as American Patriots expected to readily accept the Obama plan?

No.

Key West Reader on May 27, 2011 at 4:02 PM

More and more I find myself blaming The One less and less for the economic problems. They’ve been a long time in coming and there are multiple reasons, I believe, from both sides of the political spectrum, the middle, and millions of Americans themselves. Capitalism by its very nature produces waste and redundancy that is unsustainable. It consumes more resources than are available-and we’re simply not willing to fight for them any more.

We’ve handed over the bulk of our economy to private businessmen, the Chinese Communists, the Arab sheiks and many others. We’ve shipped off millions of tons of our lumber, oil, iron and other resources over the years so that private owners could make a buck off of our national resources. We as Americans have squandered much of our collective wealth for BS we never needed.

We’ve spent God knows how much bombing the crap out of our enemies only to spend at least as much building them up-so they could outcompete us-but we had to, we chose not to listen to George Patton.

Does Obama care? No. Do any of them? Doubtful-they’ll be fine. Is Obama OK with what’s going on and will he (and the other Marxists) do whatever he can to help it along this way? Of course.

In the end, we will just tear into each other and the Socialists will step in to restore order. All this talk of “revolution” means nothing. The revolutionaries will be tired, dead, or out of ammo just defending their homes and families before they see the first Federal unit coming in to take over utilities, set up checkpoints, and start going house to house confiscating weapons.

The main thing that the Republicans and the non-Marxist Democrats are deathly afraid of are that those welfare checks will stop-the second is that shipments to your local China-Mart will dwindle and then stop.

For Obama and his crowd, that’s exactly what they want. So they will do nothing but wait until it all comes crashing down. Even after he’s out of office, you can bet Barry will be a major player in the newest Socialist Republic.

Dr. ZhivBlago on May 28, 2011 at 7:08 PM

bossom

HalJordan on May 29, 2011 at 11:09 AM

bosom

HalJordan on May 29, 2011 at 11:09 AM

All this talk of “revolution” means nothing. The
revolutionaries will be tired, dead, or out of ammo just defending their homes and families before they see the first Federal unit coming in to take over utilities, set up checkpoints, and start going house to house confiscating weapons.

Dr. ZhivBlago on May 28, 2011 at 7:08 PM

I actually tried to join a militia a few years back…all I could find in my entire state was a dusty website visited by creaky old geezers.

Suffice it to say that I am not enthusiastic about the 2nd American Revolution being a success.

Uncle Sams Nephew on May 29, 2011 at 12:40 PM

No, it went down by “less than 0.1%,” not up. Inflation on all prices rose 0.3% in April, and in “core” prices by 0.2%. The overall PCE index has risen 2.2% over the last 12 months, which isn’t a bad rate of inflation if the economy was actually growing significantly.

Sorry Ed, but this is the phony “Administration Line”: NOT the “real world.”

The statistics carefully selected by the Washington Insiders to represent “inflation” specifically exclude the cost of food and energy. This tactic produces an “inflation” figure which is completely unrealistic for both consumers and business, and which is therefore completely worthless.

A better “off the cuff” analysis might be to look at the rate at which the national debt is growing. If this figure does not match what Washington publishes as “inflation” (which is the decrease in purchasing power of the dollar), you KNOW that the published figures are phony.

Congress is currently arguing about a situation which adds $1.5 Trillion per year to the $14.3 Trillion National Debt. This implies that the “real” inflation rate is 1.5/14.3 = 10.5%, which would be roughly 0.875% per month. So if someone tries to tell you that inflation is significantly lower than 10.5%. he is just “peeing on your shoes and telling you it’s raining“!!

And even the 10.% figure is obviously too low, because Washington ‘hides’ a lot of the deficit, like the extra $2 Trillion to implement Obamacare, and deficits from other “off budget” items.

The published low-ball inflation figures are just an attempt by Washington DC to hide the government’s pervasive mismanagement and corruption.

landlines on May 29, 2011 at 1:59 PM