Same Old, Same Old - Spending Up, Income Flat
In July, real consumer durable goods spending increased 6.4% compared to the same month one year ago. This is the 10th straight month of such increases, but the rate of growth has slowed each of the last four months. Since March, real consumer spending on durable goods had been falling each month. However, July saw spending rise just slightly above the March level. Spending is up 11.4% since its bottom in December 2008, but it still has not reached the level seen in August 2009 – the peak of the cash for clunkers program. While spending is still improving, real personal income excluding government transfers is virtually flat. In July, income less government transfers was just 0.5% higher than it was last July. Income had been improving slightly month to month through late 2009 and early 2010 but incomes haven’t budged the last three months. As I have repeatedly said, spending improving more and prior to incomes is out of whack from the normal economic cycle and is not sustainable in the long run. For more on income and spending and their relationship to manufacturing, go here.