Consumption Recovery Slow Despite Massive Increase in Disposable Income

By
Economic Report Monitor #49
June 26th, 2020

From FxPro

The week ends with a look at the report of personal income and outlays in May. On a month over month basis, personal income fell -4.2% after being boosted by stimulus checks in April. Disposable income fell with it, down -4.9%. The increase in cash from the stimulus and partial reopening of the economy allowed consumption to rise 8.2% in May. The largest bump was in durable goods consumption which grew 28.6% while services consumption was up just 5.4% and nondurable goods consumption was up 7.7%. However, inflation remains at lows from April with the general PCE price index at 0.5% and the more closely followed PCE price index (excluding food and energy) at 1.0%. YoY comparisons still put personal consumption down -9.8% despite disposable personal income up 8.2% in the same period. Here, services lag the most, down -14.3% from a year ago. It's clear that consumers' economic well-being is not the culprit for sluggish consumption, but instead a public health concern that continues to limit demand.

Those public health concerns have translated to a continued drop in the UMich Consumer Sentiment index which grew 8.0% in June but is still down over -20% on a year-over-year basis. The final reading of June fell below the early reading as cases started to increase towards the end of the month. As of the end of the month, the current economic index is up 5.8% as opposed to the early reading of up 6.7%, and the expectations reading is up 9.7% as opposed to the early reading of up 10.9%. The main gains in sentiment are most visible in the regions that have not seen a resurgence. Specifically, the West and the Northeast indexes were higher than the Midwest and South indexes. It seems that sentiment will continue to be tied to the likelihood or the progression of a second wave. As a result, more optimistic sentiment (for the future especially) may be tied to states with reasonable restrictions that are being obeyed.

Comments

Post a Comment

Popular posts from this blog

Prolonged Tariff Dispute Threatens the Farming Industry: Lessons from the 1980s

By
Image
President Trump's protectionist trade policies have been one of his more contentious economic policies garnering resistance from critics of all political leanings. The tariff dispute between the United States and China is the most well-known consequence of these policies and has resulted in economic growth worries. The U.S. stock market sat on the brink of a full-on bear market at the end of 2018 but recovered sharply in the first two months of 2019. Observers continue to monitor negotiations between top U.S and Chinese conveys that have yet to produce a decisive trade agreement. Soybean and corn farmers are two groups within those observers that are watching closely in hopes of seeing their markets improve. According to Reuters , USDA Chief Economist Robert Johansson reported that “under the trade dispute, exports to China alone have plummeted by 22 million tonnes, or over 90 percent.” The dramatic reduction in Chinese exports so far has weighed on the latest 2019 projectio...
Read more

World Employment and Social Outlook Trends 2020

By
Image
The International Labour Organization (ILO) recently released its principal report of the upcoming year of 2020. The "World Employment and Social Outlook: Trends 2020" publication brings to the forefront the trends seen in the global workforce whether and how they are enhancing or inhibiting economic growth. The organization identified four forces that are changing the way we work and grow as a global society. As seen by the growth of inequality in most economies, "the lack of inclusiveness" is likely to "impair the ability of lower-income countries to reduce poverty and improve working conditions" especially in conditions of slower economic expansion. Despite largescale technological advancements that cause low-income economies to see an accelerated growth rate in high productivity jobs, those economies have lagged against their higher-income, more industrialized peers. The report points out that "between 2000 and 2018, the employment share...
Read more