Joe Sixpack’s demise as a consuming animal has been widely predicted for some time, but greatly exaggerated, to judge by yesterday’s update on personal income and outlays for January.
The Bureau of Economic Analysis reported that personal income rose by a healthy 0.7% in January over December. But as is the inclination these days, Joe and his counterparts across the country spent more than they made in the first month of 2006 by elevating spending by 0.9%.
The trend of spending in excess of income is nothing new in the American economy. Deficit spending generally is very much the fashion these days, in both government and on the homestead. And if one defines the money supply by the M3 series, the central bank seems only to happy to make sure that everyone has enough paper to keep the spending train in motion.
One only has to look at the state of Joe’s income and outlays to find the evidence of said rolling on the consumer front. Indeed, for the third month running, the percentage change in consumption expenditures has risen at a rate above that of personal income’s advance. Going back over time, that’s far from atypical. To be sure, elevating one’s spending by a pace that exceeds income growth will eventually hit a brick wall, although one could die waiting for such economic constraint to kick in when it comes to our beloved Joe.