A number of pundits today were quick to declare that the business cycle had finally rolled over last month because consumer spending fell slightly in June, as noted in this morning’s update via the Bureau of Economic Analysis. One blogger insisted—insisted!—that the 0.1% decline last month in real (inflation-adjusted) personal consumption expenditures (PCE) was a clear and unambiguous death knell for U.S. economic growth. But in the rush to judgment, some analysts are overlooking a few things.
Daily Archives: July 31, 2012
Personal Income Rebounds In June With Flat Consumer Spending
Disposable personal income (DPI) is rising again, but consumption remains flat. That’s the message in today’s update for the June income and spending report from the Bureau of Economic Analysis. The trend is certainly encouraging on the income front. But the unchanged level of personal consumption expenditures (PCE) is a problem if it continues. Then again, it’s not surprising that the public is inclined to save these days. The paradox of thrift may be a bigger problem in the months ahead if the urge to save rolls on and/or accelerates. But the fact that DPI has made an impressive rebound in terms of its growth rate in June suggests that it’s still premature to expect the worst. Savings mixed with higher income is hardly a sign of an economic apocalypse. Then again, one month alone never tells us much.