Consumption growth continues to outstrip income growth
The BEA released US personal income and consumption figures for March today. The data show that the growth in consumption continues to outstrip the growth in personal income.
Personal income increased $36.0 billion, or 0.3 percent, and disposable personal income (DPI) increased $32.3 billion, or 0.3 percent, in March, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $58.6 billion, or 0.6 percent. In February, personal income increased $7.1 billion, or 0.1 percent, DPI increased $4.3 billion, or less than 0.1 percent, and PCE increased $56.4 billion, or 0.5 percent, based on revised estimates.
Real disposable income increased 0.2 percent in March, compared with an increase of less than 0.1 percent in February. Real PCE increased 0.5 percent, the same increase as in February.
Take out government transfer payments and you have zero income growth. As I noted in my review of the GDP numbers on Friday, this is an unsustainable trend. Something has to give eventually: either incomes will have to rise more quickly to sustain the rate of growth in consumer spending or spending growth will have to come down to the lower level of income growth. With huge slack in the US labour market, all indications are that income is the weaker link.