Personal spending looks strong, but the personal income side of the ledger still looks troubling, according to today’s December report from the US Bureau of Economic Analysis. Indeed, the year-over-year growth rate for disposable personal income (DPI) turned negative last month for the first time in four years. Personal consumption expenditures, by contrast, rose 3.6% for the year through December—the best annual jump in a year. The optimistic spin on the weak income data is that it’s suffering from a temporary bout of various seasonal distortions and/or the end of jobless benefits for 1-million-plus jobless workers last month. Only time will tell if the sharp decline in income’s trend is noise or something darker. Clarity’s going to take a couple of months at the earliest. Meantime, let’s review the numbers in search of some perspective on how the data stacks up at the moment.
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The US economic trend has decelerated in late-January, based on a markets-based profile of macro conditions. The Macro-Markets Risk Index (MMRI) closed at 8.8% on Thursday, January 30. That’s still at a level that suggests that business cycle risk remains low, but the recent decline in MMRI leaves the index near its lowest level in four months. For the moment, however, it doesn’t appear that the latest decrease in MMRI is a sign of trouble for the economy. MMRI appears to be stabilizing around the 8% mark, which is still well above the 0% danger zone. If MMRI falls under 0%, that would be a sign that recession risk is elevated. By contrast, readings above 0% imply that the markets are anticipating/forecasting economic growth.
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