The Personal Income and Outlays report is issued by the Bureau of Economic Analysis (BEA) monthly. This report provides a measure of income received from wages and salaries, as well as investment income, as well as an estimate of personal consumption on goods and services, interest payments made on non-mortgage debt and certain transfer payments. This is an important economic indicator since personal income is one of the largest factors driving consumer demand. If people have more disposable income, they will generally spend more money or increase savings. In addition, the PCE Price Index (with food and energy removed) is considered by the Federal Reserve as its key measure of inflation.
As was telegraphed by the 1st quarter GDP report, Personal Income and Outlays rose at an anemic 0.2 percent in March, following a terrible January and somewhat stronger February. Virtually no income class achieved much of any growth outside of farm income which was up nearly 9 percent. Income from investment actually fell reflecting dissaving in the American economy in the low interest rate environment. Taxes also increased somewhat in March as businesses and individuals began filing federal returns.
Outside of taxes, spending (or outlays) was roughly flat with some transfer of spending from goods (both durable and non-durable) to services. Real disposable income and savings (on a per capita basis) improved by 0.3 percent reflecting slow population growth over the month.
The PCE price index (without food and energy) rose at an annualized rate of 1.1 percent, but the cost of services rose somewhat faster (1.7 percent) while the cost of goods fell slightly.
While extremely important for many mainstream economists, the retail sales figures say little about production or whether the overall economy is strengthening. They do suggest that American’s continue to spend what they make meaning that there overall debt levels are increasing. Companies hoping for a consumer fueled surge in growth are unlikely to see this since consumers are tapped out and are actually retrenching in terms of their purchases of “stuff.” At the same time rising taxes and falling investment income are continuing to put pressure on consumers to tap their already dwindling savings just to purchase staples.