Chart Notes
- DPI stands for Disposable Personal Income
- Disposable Income means income after taxes
- PCE means Personal Consumption Expenditures, in simple terms, consumer spending
- Real means inflation adjusted by the PCE Price Index, not the CPI
Transfer Payments
Transfer payments are redistributions of money for which there are no goods or services exchanged.
Social Security, Medicare, Medicaid, and food stamps (now called SNAP) are examples of transfer payments.
Real Income Minus Transfer Payments is part of what the NBER looks at when determining recessions.
Real Disposable Income Minus Transfer Payments
The Bureau of Economic Analysis (BEA) released Personal Income and Outlays data for January of 2023 on February 24.
Yesterday, I posted charts in Personal Spending Rebounds Strong in January, But What About Income?
My charts were accurate but my comment "Consumers went on a buying spree with a strong rebound in both goods and services. Income excluding government handouts is another matter" was off the mark.
Today, I added a new line to my charts, Real DPI Minus PCTR.
Neither the BEA nor Fred (St. Louis Fed data repository) provide that number. Fred does provide Real Personal Income Minus PCRT but that is a misleading number.
With Fred charts, one can calculate Real DPI Minus PCTR. I added that calculation to my charts. As a crosscheck, my calculation of Real Personal Income Minus PCTR matches Fred.
Let's take a look at how these numbers have evolved over time.
Personal Income Five Ways, Billions of Dollars Long Term
Real Income data from the BEA, chart by Mish
Current Personal Income Five Ways
- Personal Income (PI): $22,562
- Disposable Personal Income After Taxes (DPI): $19,595
- Real (Inflation-Adjusted) DPI: $15,568
- Real Personal Income Minus PCTR: $14,741
- Real DPI Minus PCTR: $12,384
The impact of government handouts and inflation get more and more extreme over time.
Note that Real DPI Minus PCTR has not grown in nearly three years.
Personal Current Transfer Receipts
Personal Current Transfer Receipts (PCTR) data from BEA, Real PCTR calculation by Mish.
Those three rounds of fiscal stimulus coupled with eviction moratoriums and student debt cancellation fueled inflation.
Personal Current Transfer Receipts Percent Change
Personal Current Transfer Receipts (PCTR) data from BEA, Real PCTR calculation by Mish.
In real terms, PCTR dropped significantly in January. This is almost entirely due to the PCE price index rising by 0.6 percent.
In nominal terms, PCTR only declined 0.01 percent.
Personal Income Five Ways Percent Change
That is the chart that matters most and it's one that I did not have yesterday, nor have I seen posted anywhere else.
Month-Over-Month Personal Income
- Personal Income: 0.58
- DPI: 2.02
- Real DPI: 1.39
- Real PI Minus PCTR: 0.09
- Real DPI Minus PCTR: 1.92
Although Real DPI Minus PCTR has gone nowhere for three years, it took a big leap in January. This will certainly catch the Fed's attention.
I will explain the jump in a follow-up post.
Who Is to Blame for Inflation?
President Trump, President Biden, Congress, and the Fed have all played a roll in the inflationary mess we are in.
One can also blame the War in Ukraine and Covid, but supply chain disruptions of Covid were temporary. Policy responses, however, are ongoing.
President Biden's push for more free education, unions, EVs, and student debt cancellation are hugely inflationary.
So is the administration's political response to the war in Ukraine.
How the Fed Messes With People's Lives
The Fed is attempting to undo the damage it has caused by hiking rates.
Alas, it is impossible for the Fed to quickly, if ever, undo the damage it has done.
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