I try to avoid making a big story out of one month's numbers, but when those numbers are indicative of a clear, underlying trend, it's legit to take a closer look.
Such is the case with the release this morning of income and spending numbers for June.
The figure below shows the monthly change in three numbers. The first number is -0.2%. That's the decline in consumer spending in June, the first such decline in two years, i.e., since the official recession.
The second number is zero. That's the change in spending once you factor in inflation.
Now, you will notice that usually, adjusting for inflation makes growth numbers smaller, as nominal growth minus price growth equals real growth.
But what if inflation is negative, which as you see in the third bar, it was in June?
So, in June we enjoyed declines in both consumer spending and consumer prices. Again, it's just one month's data, but it's consistent with the extremely weak demand story we've seen in many other reports. It also helps explain June's lousy jobs report.
And remember, we just learned the other day that real consumer spending was flat in the second quarter, so June wasn't a quarterly outlier.
Prices are not, however, in decline on a year-over-year basis, which is a better way to look at them. The spending price deflator is up 2.6% over the past year, but take out food and energy, as you should to get a more accurate measure of price pressures, and it's 1.3%. Not deflation, for sure, but indicative of the underlying weakness we see in June's data.
This is an economy in serious need of help, and the debt deal doesn't help. That is, unless in clears the decks for some actual policy-making to give this economy a nudge forward before it topples over.
This post originally appeared at Jared Bernstein's On The Economy blog.
Big business is sitting on huge amounts of cash, but will no expand operations in this country as long as there is little demand for what they produce. It is no wonder the prices of those items is declining.
This is not a cyclical situation, but a long-term problem that has been caused by the decline in earnings for the working people of America while the GREEDY CLASS amasses huge fortunes. The policies of the Reagan Administration set of the huge growth in income disparities and those trends have been accelerated by Republican policies ever since. We are only now beginning to realize the negative effects of those policies because the economy has been propped up by huge amounts of consumer debt.
Let's get this country off of this diet of Republican corn pone and back into growth mode. Take back the country from the defeatists who would sell out every traditional value and the people who made and support those values. Hit the streets and help take our country back by discarding the hate, fear, greed, jealousy, and bigotry that is sold by and is the mainstay of the Republican party. Renew America now.
Too late, that ship has sailed.
Yes it does need help, however, there is nothing that can be done at this point or going forward for that matter. The Political class has effectively sealed off those options.
The only thing that people can do is hang on the best they are able to. Of course, this will depress the economy even more as they choose to save over purchasing. What's good for the individual is bad for the economy when it comes to holding off purchasing.
The invisible hand will step up and take care of things.
No worries
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Nuclear plants without grid power for a month can spew radioactivity into surrounding communities and downwind.
This is a peril worse than a terrorist attack. See maps at www.aesopinstitute.org to quickly understand why.
This emergency can become the missing lever to move the economy in a big way. Articles on the Aesop website outline how and why.
Wise leadership can now unite the country and create millions of jobs.
Really? I thought it was the Republicans who mantra is "Drill baby drill!"
BTW: link to the specific source of your numbers, not a giant gov site, ok?
Was the debt deal meant to help the economy? It helps the rich. Period. Rich people don't need jobs. You may be over analyzing things. You're starting to sound like a sort of Pavlov Dog Citizen Journalist. Still hoping that Washington is going to by some miracle stop screwing us? Doubtful Jared. You need to get a whole lot edgier. You're so "in the box". Let's all plead for justice! That's all we have to do! Let's blog! Someone said this is the information age and we can change stuff just by willing it on the internet! Baloney. Policy Schmolicy. The policy is the status quo and let the schmo blow on the HUFFPo all he wants until he's blue in the fingers.
Here's the real thing. Interest rates rise to make up for lost profits due to a massive recession/depresssion. Millions more lose their jobs. It's actually happening now. Today. Neither Obama or Boehner has any intention whatsoever of lifting a finger. They collect donations and then they run for office. If they get elected they serve Wall St from sun up to sunrise each day.
Hopefully, we'll get all of this back on the right track, but it will require that Republican political leaders (McConnell, Boehner, and Eric the Cantor) give up their 'Game of Thrones' and rejoin the United States of America.