Today's expenditure and revenue report for August is no silver bullet, but it suggests that the risk of recession and deflation has fallen for the near future. Economy, in other words, stronger than it appeared during the summer.
Disposable personal income (DPI) increased a healthy 0.5% in August vs. July, U.S. Bureau of economic analysis of the reports. It is the best profit since April, when the prospects for the economy, while still well short of stellar, was much lighter than it was during the last few months.In the meantime been private consumption expenditures (PCE) 0.4% in August, matching Julius pace. it is the highest since the 0.5% in March.
In short, the expenditure and income have grown from the summer slowdown. Economy continues to be harassed with any number of challenges, but it is quite a bit tougher to argue that deflation and depression lurks around the corner after reading today's numbers. Everything is possible, of course, but the August updates specifies no deterioration in consumer spending and income.
Sceptics are quick to point out that the monthly figures can be misleading and so we must also consider the broader trend. True, but there is encouraging news here, albeit with a warning. Let us begin by looking at the rolling 12-month percentage change in DPI and PST, as shown in the diagram below.
Income remains in positive territory on a year over year (black line); rate of increase for DPI has in fact increased in recent months. But consumption has slowed (red line). For August increased PST approximately 2.7% compared with the previous year. It is close to the minimum 12 month rate this year.
Slower consumption is not surprising. Household balance sheets is still loaded with debt and working through the red color will take time and (probably) higher levels of savings.We make some of that in the various reports of late. Surprises are whether the savings continue to rise and, if so, how much damage the trend fuelled spending? it is a subject that bears watching, and given the current climate, there is reason to be cautious.However, currently propose at least, August numbers don't a dramatic decline in consumer spending growth Remains; sluggish? Or drop sharply in the coming months? Stay tuned.
In the meantime, let us not forget that the pace of growth in expenditure and revenue of late, although it does smooth, well below the rate of growth posted in before the large heating. The economy has recovered, but the lingering effects for 2008 and 2009 is still with us.
Fortunately, there is no indication that growth in private sector wages are injured.Yes, we are still lower than the rates published in 2005 and 2006, when the economy firing on all cylinders.But it is clear that there is an acceleration of progress in 2010.In fact, private sector wage bill payments advanced 0.5 percent last month, matching Julius pace.It is close to the strongest monthly rate in more than one year, And on an annual basis, private-salary increases continue to inch higher.During the 12 months by August 2010 increased pay 2%, the highest level since before the great warming in 2007, as in the second chart below.
All these things tell us that everything is good? no, of course, not all major challenges in the months and years to come are still waiting begins with the problems associated with sluggish growth in the labour market, But too late, the urgent question been worrying about a new recession. today's report on consumption and income provides reasons for increasing optimism a notch or two to expect us to escape this fate.
The acute risk seems it drops. "that's good news, but not to celebrate too long. The chronic diseases are still with us and require attention.
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