Personal Income and Consumer Spending
The Department of Commerce reported today that personal income in August was $11,051.9 billion, up 0.3 percent from July. Nominal personal consumption expenditures (PCE) rose 0.1 percent while real PCE decreased 0.1 percent. Nominal disposable personal income (DPI) rose 0.4 percent while real DPI increased 0.2%. Personal savings as a percentage of DPI was -0.5% in August.
With core inflation, which excludes food and energy, up 2.5 percent from a year ago and posting the largest increase in more than ten years, this was the weakest performance in nearly a year. Core inflation, which excludes energy and food, was up a worrisome 2.5 percent compared to a year ago, the biggest year-over-year increase in more than a decade.
While unemployment just under five percent, certainly down from a year ago, there remain more than 7 million unemployed and a second Gross Domestic Product (GDP) of 2.6 percent doesn't provide much foundation for greater growth as statisticly several quarters of growth approaching 8 percent are required to bring employment levels back to their previous strong position.
While most economists believe the we will sidestep a recession, it remains clear that one of the nation's primary economic drivers, the housing industry, is already approaching that economic environment. On the other side of that coin is the inflationary impact of energy costs. Even with gasoline prices softening to the mid-$2.00 range, they, as well as home energy costs remain a substantive burden and drain on the consumer.
We are, in fact, looking a period of relatively high unemployment, though not especially manifest statistically; a period of some relative inflation; and a period, with respect to the middle and lower wage earners, of stagnation.
Consideration should be given to the possibility of a very challenging period of stagflation. While it may not be as severe, or even the same as that which occurred in the 1970s, as our economic environment is simply different, it could well be as painful.
Stagflation Economics
With core inflation, which excludes food and energy, up 2.5 percent from a year ago and posting the largest increase in more than ten years, this was the weakest performance in nearly a year. Core inflation, which excludes energy and food, was up a worrisome 2.5 percent compared to a year ago, the biggest year-over-year increase in more than a decade.
While unemployment just under five percent, certainly down from a year ago, there remain more than 7 million unemployed and a second Gross Domestic Product (GDP) of 2.6 percent doesn't provide much foundation for greater growth as statisticly several quarters of growth approaching 8 percent are required to bring employment levels back to their previous strong position.
While most economists believe the we will sidestep a recession, it remains clear that one of the nation's primary economic drivers, the housing industry, is already approaching that economic environment. On the other side of that coin is the inflationary impact of energy costs. Even with gasoline prices softening to the mid-$2.00 range, they, as well as home energy costs remain a substantive burden and drain on the consumer.
We are, in fact, looking a period of relatively high unemployment, though not especially manifest statistically; a period of some relative inflation; and a period, with respect to the middle and lower wage earners, of stagnation.
Consideration should be given to the possibility of a very challenging period of stagflation. While it may not be as severe, or even the same as that which occurred in the 1970s, as our economic environment is simply different, it could well be as painful.
Stagflation Economics
