The BEA reports “Real DPI decreased 0.1 percent in August and Real PCE decreased 0.1 percent. The PCE price index increased 0.2 percent. Excluding food and energy, the PCE price index increased 0.1 percent.”
Unadjusted, personal income in August rose 0.2% as the Econoday consensus expected, but June and July income were revised lower.
Consumer spending rose a mere 0.1%. Real spending declined.
Economists expected prices to jump 0.3%. Instead, prices rose 0.1%. Core prices rose 0.1% vs an expectation of 0.2%.
The next Federal Reserve rate hike may not be in December after all, based on an unexpectedly weak personal income and spending report that includes very soft inflation readings. Income is the best news in the report as it managed the expected 0.2 percent August gain getting boosts from proprietor income, transfer receipts and also rent. Wages and salaries, in part reflecting a decline in hours, came in unchanged though this follows strong growth in the prior 2 months. Another weakness in today’s report is a 1 tenth downward revision to overall July income which now stands at 0.3 percent. The savings rate held unchanged in August at a moderate 3.6 percent.
Now the bad news starts. Spending came in at only 0.1 percent as spending on durables, the likely result of Hurricane Harvey’s late month hit on Texas and related declines in auto sales, fell a very steep 1.1 percent to fully reverse strength in the prior month. Spending on both nondurables and services actually inched forward in August to 0.3 percent each.
The really bad news comes from inflation readings as the core PCE price index, which is the Federal Reserve’s central inflation gauge, inched only 0.1 percent ahead while the year-on-year rate fell backwards, down 1 tenth to 1.3 percent for the weakest result since November 2015. Overall prices, likely getting a small boost from a Harvey-related spike in gasoline prices, rose 0.2 percent with this yearly rate, however, also moving backwards, down 1 tenth to 1.5 percent. All these inflation readings, interestingly, came in no better than Econoday’s low estimates.
Data in this report, after inflation adjustments, are direct inputs into third-quarter GDP and the results will pull down estimates. Real spending fell 0.1 percent in August to cut in half July’s 0.2 percent gain. The Bureau of Economic Analysis which compiles the report could not quantify Harvey’s effect and had to make estimates for missing data. Yet the impact appears obvious and is the most tangible hurricane effect so far to hit the nation’s economic data. The next hurricane effects will be coming from Irma’s September strike on Florida.
Hurricane Harvey
BEA cannot separately quantify the total impact of the storm on personal income and outlays because most of the source data used to estimate the components of personal income and outlays do not separately identify storm impacts. BEA made adjustments to estimates where source data were not yet available or did not fully reflect the effects of the storm.
Revisions
Real PCE and Income
Mike “Mish” Shedlock
Back to the future, ZIRP for ever and ever, amen.
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QE 4?
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“Wages and salaries, in part reflecting a decline in hours, came in unchanged though this follows strong growth in the prior 2 months.”
…
Also true that wages and salaries for July, June, May, and April revised lower.
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Yes, and we find this out today. Was that reflected in yesterday’s GDP report?
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Think there is a typo in the title — real income declined, but prices were **UP** 0.1%
Econoday is a joke, who cares what they were forecasting. Its much much cheaper (and often more accurate) to just roll a dice
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Mish — think the last sentence in title has a typo… real income and real SPENDING declined… not prices
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Absolutely.
Thanks
VCorrection made
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UVXY?
Seven come eleven,,,baby needs a new pair of shoes.
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It should be very interesting to see how “folks” cope with the upcoming 40%+ increase in 2018 Obummer Care premiums on a 1.2% increase in disposable income.
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I think it was Mish that suggested Trump should have left Obamacare to fail under its own weight and then replace.
Won’t be long.
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The tax penalty for being healthy without subsidizing obama’s free sh!t army is 2.5% of AGI???
So if one is a “middle class” taxpayer (defined as AGI at the mean income level of $65K), the health penalty is $1,625… which is maybe two months premium for a single person, and maybe one month for married joint filers.
If one has an existing health issue, “insurance” might make sense. If one’s employer is picking up most of the tab, then again it might make sense.
But if total compensation is climbing 2-3% (ha ha, try not to laugh), then employers are going to be sticking employees with a greater piece of the cost — and so it might not make sense for many employed people either (even if the employer offers it).
Of course, people will still get sick / have injuries — so “self pay” in cash is going to be much more prevalent. Hospitals are going to get stuck with a lot more uncollectable bills.
Consumers who pay their bills are going to demand cash discounts, and doctors that hope to be paid this century are going to offer discounts.
The USA is going to have THREE health care systems. Rich people will have concierge doctors, as already happens in England. The middle class will pay cash, often off the books. And obama supporters will get the hospital equivalent of public housing.
The more talented doctors are going to want to be paid — so they will gravitate toward cash pay (concierge or literal cash). The DMV worker equivalent in doctors will work in public housing… I mean obamacare facilities.
Social security is already defacto means tested — as in the wealthy and middle class already have medicare premiums deducted “automatically”. The definition of “rich” will creep lower and lower until most baby boomers have their social security confiscated to pay for “free” medicare.
Millenials living in their parents basement are not going to move the needle on this, even if they manage to skip town on their student loans, because they have been underemployed for so long.
Obamacare and socialism are going to kill a lot of people.
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A couple of things
1) Most people don’t get their health insurance thru ACA.
2) Kaiser permanente pegs 84% of people getting insurance thru ACA receive a subsidy from USG.
But, no doubt, health insurance will continue to go up for most folks …just not at the rate of ACAers.
…
“Our survey finds employer premiums rose just 3 percent this year – far less than the 20 percent average in the Affordable Care Act marketplaces,” KFF President and CEO Drew Altman said. “While the marketplaces seem to get all the attention, the much larger employer market where more than 150 million people get their coverage is very stable.”
https://www.kff.org/private-insurance/press-release/premiums-for-employer-sponsored-family-health-coverage-rise-slowly-for-sixth-straight-year-up-3-but-averaging-18764-in-2017/
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The problem is the underlying cost structure of health care, not the insurance overlay.
DMV managed insurance from government is that much less efficient, but its just another (overpriced) insurance overlay.
Your employer isn’t giving you insurance for “free” — its part of your total compensation (from your perspective) or part of the total cost of hiring you (from employers perspective).
The underlying COST problem is in the healthcare system, so it effects both ACA and non ACA insurance. Having a bunch of inept and uncaring government bureaucrats involved just makes ACA that much worse.
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–> “Kaiser permanente pegs 84% of people getting insurance thru ACA receive a subsidy from USG.”
False. The USG doesn’t pay for anything. You meant to write that other taxpayers provide the subsidy.
–> “Our survey finds employer premiums rose just 3 percent this year – far less than the 20 percent average in the Affordable Care Act marketplaces,” KFF President and CEO
No idea what planet that guy lives on — both his numbers are wrong. ACA plans are going up by at least 30% (not 20% as the KFF guy falsely claims).
And the cost of employer coverage in most states is climbing a lot more than 3% — that bogus number is the part of the increase that employers are passing along to employees.
Please read these “reports” more carefully — there is way too much disinformation coming from Washington DC already. We don’t need “non profits” like KFF (who pay zero taxes) adding to the confusion.
If you do a more thorough survey, especially in states with a high percentage of non-profits, you will find the private sector is getting absolutely walloped. For example, Massachusetts and Connecticut both have more colleges and non-profits (tax dodgers) than they have big private employers. MassMutual, Harvard, MIT, etc each contribute ZERO to their state coffers. Asking them about any tax cost is absurd.
Unless Kaisser starts paying taxes like the rest of us, they need to keep their big mouths closed.
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Feel free to support your argument with sourced facts.
Otherwise, all you have is hot air.
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You think that non-profit Kaisser Permanante pays taxes? You need supporting evidence that a non-profit doesn’t pay taxes?
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You don’t have to “google” too hard to find this: https://oc.finance.harvard.edu/faq/harvard-university-tax-exempt-organization
or this: https://projects.propublica.org/nonprofits/organizations/946064808
which has links and references to the IRS form 990 filings for tax-exempt non-profits.
Here’s an excerpt:
HENRY J KAISER FAMILY FOUNDATION
2400 SAND HILL ROAD, MENLO PARK, CA 94025-6941 | Tax-exempt since May 1950
Beautiful thing that Sand Hill Rd is also the location for armies of venture capitalists.
Stanford U is also a tax-exempt “non-profit”: https://ogc.stanford.edu/stanford-legal-facts
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Don’t know if this link will go through, but:
http://news.ehealthinsurance.com/news/affordable-care-act-health-insurance-will-be-unaffordable-in-2018-for-many-middle-income-american-families-ehealth-analysis-shows
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So?
I’m not denying that premiums are going up double digit for ACA. But the vast majority of those will receive a subsidy from USG (and don’t worry the taxpayers are not paying for it … at least not yet. Part of the $trillion+ added to USG debt total every year).
Your link does not cover insurance premiums for those outside ACA. Yes, they are – and have been – very high $ wise, but rate of increase has been relatively stable (compared to ACA). My family’s insurance rate increase has been in the single digits.
My 2 points still stand:
1) Yes ACA insurance has skyrocketed, but most of those receive subsidy.
2) Rate increase for insurance plans outside of ACA have grown at slower place.
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@Tony — Your family insurance might have gone up 3% per person… but you are still ignoring how much of the increase was absorbed by your employer.
You have been indoctrinated into a cult and show no ability to think for yourself. You keep spouting the party line that they have told you to think. You aren’t worth arguing with since you will think whatever you are told to think
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Economist know next to nothing about the economy,but I will give them credit for one thing: they know that bearers of bad news get their heads chopped off.
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Income is not going up much but total compensation is: http://reason.com/archives/2017/09/23/health-care-costs-are-the-reas
Key point: real income last 40 years up 2.7%, fringe benefits up 60%.
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Total Compensation for employees — April, May, June, and July all revised down, as well, in this report.
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