On its face, today’s report from the Bureau of Economic Analysis looks like good news. It shows personal income rising 0.4% in April, and personal consumption expenditures increasing by the same amount. However, when the BEA accounts for increased taxes and inflation, the picture looks quite different indeed:
Real DPI decreased less than 0.1 percent in April, in contrast to an increase of less than 0.1 percent in March. Real PCE increased 0.1 percent in April, the same increase as in March. …Reuters calls the narrow decline in real DPI a “tepid” and modest rise in its report, but notes that inflation has returned — and that means that the second quarter has shown even more weakness in the start than Q1′s 1.8% annualized GDP growth rate:
Personal current taxes increased $11.0 billion in April, compared with an increase of $8.3 billion in March. Disposable personal income (DPI) — personal income less personal current taxes — increased $35.1 billion, or 0.3 percent, in April, compared with an increase of $46.3 billion, or 0.4 percent in March.
Consumer spending rose modestly in April, starting the second quarter on a soft note as high gasoline prices continued to squeeze household finances and keep inflation pressures simmering.They then manage to misreport the real DPI, which is defined by the BEA as “DPI adjusted to remove price changes,” in order to account for inflation:
When adjusted for inflation, spending nudged up 0.1 percent last month after gaining 0.1 percent in March.No, it went down by “less than 0.1%,” not up. Inflation on all prices rose 0.3% in April, and in “core” prices by 0.2%. The overall PCE index has risen 2.2% over the last 12 months, which isn’t a bad rate of inflation if the economy was actually growing significantly. With a real GDP of 0.6% in Q1 and flatlines in real spending and wages, we’re entering into a mild stagflation cycle, thanks to fuel costs that the recession temporarily kept low.