After all the hype about the great holiday season for retailers, the data just came in saying that personal consumption expenditures were actually flat for December, actually real PCE went down 0.1%. The other side of that is real disposable personal income went up 0.3%. This was being heralded by some MSM as being great because savings went up. The personal savings rate was up to 4.0% from 3.5% which I see as a very good thing. What surprised me was that so did many other analysts. Normally these folks point to spending as the cure for what ails our economy. The other bit of data was that the PCE price index, the one watched closely by the Fed, increased 0.1% in December, or 2.4% YoY.
Charts always reveal the trend and as you can see real DPI has fallen quite a bit, and has flattened out. As well PCE is going down, not up. These facts seem to get lost in the hype. If the personal savings rate would now continue to rise, and people didn’t have to resort to savings to fund spending on necessities, then things would be turning positive.
Not to sound too “grandiose”, as Newt likes to say, readers of The Daily Capitalist already knew that the retail numbers would be weak.
The above data is put out by the Bureau of Economic Analysis (BEA). There is another set of data from the Census Bureau that measures weekly earnings and they are not much different. The report for Q4 shows that earnings were up only 1.6% for the year. They also measure the CPI index, and that ended up 3.3% for 2011.
But wait, there’s more. Another agency, the Bureau of Labor Statistics has their own measure of wages and earnings which they refer to as compensation costs. Those were up 2.2% over the year, and the wages and salaries portion of that was up 1.8% for 2011. Only the BEA data are adjusted for inflation (above charts).
Another footnote is that the Conference Board’s consumer confidence index “unexpectedly” dropped 8 points. You can take this with somewhat of a grain of salt because the Gallup Economic Confidence Index declined somewhat and has been positive since it bottomed in August, 2011.
I don’t put too much faith in these indices, but you should know that other economists do so it may influence their view of the economy. Gallup’s index doesn’t mean much when one looks at the real data above. That is, people still cut back on spending for 2011.