First Quarter Consumption

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Thursday’s miserable GDP number supposedly included a bit of good news: personal consumption was up 2.2%.  Yay consumers!  Something didn’t quite add up, though, but after looking at the numbers for a few minutes I got distracted by something else and never came back to it.  Luckily, Dean Baker did:

Many pointed to this rise as an increase in consumer confidence.

Okay, so how does this increase in confidence fit with the rise in the savings rate from 3.2 percent to 4.2 percent?….Higher consumption can’t be explained by rising income either. Income fell in the first quarter. So, where does higher consumption come from?

The answer to the mystery is lower taxes and higher transfers, most importantly the big cost of living increase in Social Security payments that seniors got this year. (The cost of living adjustment is based on the 3rd quarter CPI compared with the prior year. This included the run-up in gas prices, but not the subsequent fall.)

So there you have it.  Not really especially encouraging news, after all.  Atrios has another big reason to be pessmistic about the economy over at his place.  And I’m still waiting for Eastern Europe to implode.  Did somebody say “green shoots”?

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DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily crazy—Mother Jones' journalism is driven by one simple question: Will America will move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

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