Americans starting to spend big like it's 2005. Uh oh...

I noted that there were some intriguing figures and trends in last week’s Personal Income and Spending report from the Bureau of Economic Analysis. On the topline, October finally featured good news for American incomes. After 4 straight months where US disposable incomes were near or below 0.0%, October featured a nice bounce-back.

Personal income increased $65.1 billion (0.4 percent) in October according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $66.1 billion (0.5 percent) and personal consumption expenditures (PCE) increased $34.4 billion (0.3 percent).

Real DPI increased 0.3 percent in October and Real PCE increased 0.1 percent. The PCE price index increased 0.1 percent. Excluding food and energy, the PCE price index increased 0.2 percent.

But that 0.5% increase in overall disposable incomes is a one-month break from a trend of stagnant incomes over the last 2 years. As you can see, there hasn’t been one quarter in 2016 or 2017 that has gone above 3% real disposable income growth on an annual basis. That is quite the reversal from the uptrend we saw in the 2 years before that, and looks a lot like what we were seeing 10 years ago.



I was also looking at the real per-capita figures for disposable incomes, and they declined for the 3rd Quarter of 2017, mirroring the stagnation we saw on a monthly basis this Summer. In fact, real per capita incomes in the country aren’t much different than what we saw at the end of 2015.



That also seems to resemble the “flattening” in growth that we saw around 2006-07 (ignore the one bump up in 2008, that was a desperation “tax rebate” at the start of the Great Recession where federal taxpayers got checks between $300 and $600 in May 2008).

On the consumption side, that small real PCE number of 0.1% was a notable drop from the 0.5% increase in September, and Real PCEs have been strong since February, with an average monthly increase around 0.25% since February.

And that trend of strong consumption led me to look at the Personal Saving figure in the Income and Spending Report, because that stat comes from disposable income – spending. As I suspected, this country’s savings rate has been in decline over the last 2 years, and what should alarm you is that this bears a lot of resemblance to the declines in saving in the mid- 2000s.



And just like the mid-2000s, we have a Bubbly stock market and relatively unaffordable housing market in many places combined with stagnant incomes. This is not a good combination.

I’m not saying an economic meltdown is imminent. I’m just saying recent economic reports on Spending and Incomes bear some interesting resemblances. And I don't see anything in this GOP's Tax Scam that would do anything to reverse that trend. Especially since that outside of rich people, marginal tax rates may not change much at all, meaning that there would be little to no change in disposable income until taxes are filed in early 2019...if you're fortunate enough to get a tax cut at all!