What came in and what went out

The Bureau of Economic Analysis reported that in June personal income increased $54.9 billion and disposable personal income $48.3 billion, each an increase of 0.2 percent. Real disposable personal income increased 0.3 percent. Personal consumption expenditures increased $65.2 billion, or 0.3 percent, and real personal consumption expenditures increased 0.4 percent. Personal saving was $646.1 billion and the personal saving rate was 2.7 percent.[1]

In the same release the price side reads like good news: the personal consumption expenditures price index decreased 0.1 percent on the month. But its increase from a year earlier held at 3.7 percent, and the core index excluding food and energy at 3.3 percent. One month of decline does not undo the price level built up over twelve; a household meets that level, and one month of decline barely touches it.[1]

What 2.7 percent conceals

Where the increase in spending went is also worth noting: of the $65.2 billion, $58.2 billion came from services spending and only $7.0 billion from goods spending. Services items — housing, health care, transport, insurance — are largely the ones that are hard to postpone. A budget that can defer a purchase for a month cannot defer the rent. That composition is a signal that necessity may be driving the increase more than choice.[1]

The most important property of the personal saving rate is that it is a single national number. The series does not show which households are saving and which are drawing down what they have; personal income receipts on assets enter the total, but the distribution of that income does not appear in the same release. What the data can support is therefore limited and still solid: nationally, real personal consumption expenditures are running ahead of real disposable personal income, and the difference is being met from somewhere. The counter-reading is that these series are subject to revision in later releases — in May, current-dollar disposable personal income rose 0.7 percent, and later data could close the gap. The signal that separates the two is whether real spending keeps running above real income.[1]