More Ugly Economics, Ugly Income

from Zero Hedge:

And another ugly economic data point. June personal income was just released at 0.1%, on expectations of 0.2%, and down from a revised 0.2% (previously 0.3%). Personal spending was far worse than expected, coming at -0.2%, down from a revised 0.1%, and missing expectations of 0.0%. PCE Core was the last metric missing, coming at 0.1%, down from 0.2%, down from a downwardly revised 0.2%. Just as importantly, as in the case of GDP, there were major downward historical revisions: "Personal income was revised up $69.1 billion, or 0.6 percent, for 2008; was revised down $244.7 billion, or 2.0 percent, for 2009; and was revised down $167.5 billion, or 1.3 percent, for 2010. .. For 2009, downward revisions to personal interest income, to personal dividend income, and to nonfarm proprietors’ income were partly offset by upward revisions to rental income of persons and to farm proprietors’ income.  For 2010, downward revisions to personal   interest income, to nonfarm proprietors’ income, to supplements to wages and salaries, and to personal current transfer receipts were partly offset by upward revisions to rental income of persons, to wages and salaries, and to farm proprietors’ income." In other words, the "rental income" that offset downward income revisions came exclusively from the $50-100 billion squatters' rent annually "generated" from homeowners not paying their mortgages. End result: a surge in the savings rate to 5.4% from 5.0%, the highest since March 2011, as consumers retrench across the board.

Disposable Income Falls, Stocks Rise

Savings dipped, also! Makes perfect sense, doesn't it? Savings down, income down, stocks up! Trading is very choppy today!

WASHINGTON (MarketWatch) — Real disposable income declined in February as consumer prices jumped by the largest amount in 2 1/2 years, the Commerce Department reported Monday.

Economists said the data show that higher prices for gasoline is starting to take some of the steam out of the economy.
The personal consumption expenditure index, which Federal Reserve officials say is a more accurate gauge of inflation than the better-known consumer price index, increased 0.4% on the month, the largest monthly gain since July 2008.
The core rate of inflation, which excludes food and energy prices, rose 0.2% for the second straight month, as January’s reading was revised higher.

American Savings Decline

September savings rate dipped to 5.3%, the lowest reading in 2010, and a decline from August's downward revised 5.6%. This is due to a miss in both personal income and personal spending, the former coming at -0.1% vs Exp. of 0.2 (and a prior revised to 0.4%) with the latter at 0.2% versus expectations of 0.4% (and an upward revised prior to 0.5%). The savings rate has now declined in a straight line since peaking at 6% (2010 high), to the current low. In other words Americans have been spending more than they were making for four months in a row. And on wonders why consumer discretionary names have been doing well...

Government's Share of Personal Income Tops 30%

On Friday, the Wall Street Journal reported US Stocks Rise, Boosted By Upbeat Income, Spending Data

The U.S. Commerce Department said consumer spending rose 0.4% in August after rising the same amount in July. Incomes, meantime, increased by 0.5% in August after a 0.2% rise in July. The numbers were slightly better than expected. Economists surveyed by Dow Jones Newswires had forecast spending and income would both climb by 0.3% in August.

Not only is the data from August, but raw numbers without an explanation as to what really happened paints a very misleading picture.

Jeff Graham at the Capital Hill Blog explains how Government Propped Up Personal Incomes In August

News accounts are highlighting the fact that the 0.5% increase in personal income in August was the biggest of the year. But the data weren’t evidence of a healthy and sustainable private-sector expansion.



Government transfer payments accounted for 60% of the increase, and the government share of personal income crept further into record territory at just over 30%. That’s up from just above 25% before the recession.

Transfer payments include Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), Food Stamps - now called Supplemental Nutrition Assistance Program (SNAP) , medical insurance (Medicaid and Medicare), and housing assistance.

Transfer payments are social schemes to redistribute the wealth. However, given the US is running an enormous deficit, one can argue these schemes are funded by the government printing money and giving it away.

Regardless of how you look at it, government share of personal income at 30% is outrageous. Moreover, more than half of that 30% is transfer payments, an equally outrageous happening.

Personal Income Mixed Bag

July US Personal Income comes in at 0.2%, on expectations of 0.3%, and a previous print of 0.0%. Yet making less money does not prevent consumer from purchasing (i.e., not paying their mortgages), coming in at 0.4%, higher than expectations of 0.3% (previous 0.0% as well). And it appears consumers may have jumped the shark on the economic "improvement" just as we double dip, with the savings rate declining to 5.9%, compared from a revised 6.2% in the prior month (6.4% initially). Other news: US PCE Core M/M at 0.1%, inline with expectations, the same as the PCE Deflator, which came at 1.5%.

Federal Income Tax Recepts Still Falling

from Bizzy Blog:
It’s bad enough the federal government’s official budget deficit has topped $1 trillion for the second year in a row, according to the just-released June 2010 Monthly Treasury Statement. But, focusing only on receipts for the moment, a closer look makes it obvious that the situation is even worse than it appears. Don’t expect the establishment press to take any interest in the annoying but revealing details that follow.
Here is what Martin Crutsinger of the Associated Press wrote about federal collections in his Tuesday report on Uncle Sam’s current month and fiscal year deficit:

Through the first nine months of the current budget year, government revenues have totaled $1.6 trillion, up 0.5 percent from the same period a year ago.

True enough, but look at the components:

Every major component except corporate income taxes is down substantially. But it’s the last item that deserves some attention. What are these "miscellaneous receipts," and why are they up by so much (take them away, and year-to-date receipts have declined by about 1.8%).
Answer: Over $54 billion of it is from the Federal Reserve. As best I can tell, it represents dividends and interest on TARP lending and investments. This component of miscellaneous receipts is up by a factor of about 2.7 from fiscal 2009’s comparable year-to-date amount of $19.9 billion.
So the only reason receipts are up is that the Fed got into the direct lending and investment business. Tax collections that are indicators of the health of the overall economy are still down over last year, which was in turn down about 18% from the same period in fiscal 2008.
That’s not much comfort, is it?

Personal Incomes Falling

from WSJ:
Personal income in 42 states fell in 2009, the Commerce Department said Thursday.
Nevada's 4.8% plunge was the steepest, as construction and tourism industries took a beating. Also hit hard: Wyoming, where incomes fell 3.9%.
Incomes stayed flat in two states and rose in six and the District of Columbia. West Virginia had the best showing with a 2.1% increase. In Maine, Kentucky and Hawaii, increased government benefits, such as unemployment insurance and Social Security, offset drops in earnings and property values.
Nationally, personal income from wages, dividends, rent, retirement plans and government benefits declined 1.7% last year, unadjusted for inflation. One bright spot: As the economy recovered, personal income was up in all 50 states in the fourth quarter compared with the third. Connecticut, again, had the highest per capita income of the 50 states at $54,397 in 2009. Mississippi ranked lowest at $30,103.

But the Down closed higher by a hair!