Real disposable personal income (DPI) per capita in the United States declined from $46,985 to $45,356 in the past 12 months, according to data released today by the U.S. Bureau of Labor Statistics. Consumer buying power shrunk by -3.5%. 
Here’s the breakdown of income and spending, crucial factors in the consumer driven economy of the U.S: Disposable personal income was up +3.3% compared to June 2021 – before adjusting for inflation. Inflation, as measured by the Personal Consumption Expenditure Deflator (PCED), soared +6.8% in the same 12 months, leading to the shrinking buying power. Personal outlays rose +8.4%, largely because of inflation, while the savings rate, at +5.1%, in the same 12-month period, fell below its pre-Covid level. It means Americans are using an increasing amount of their monthly income and saving less to cover monthly expenses, which have risen because of inflation. 
On Thursday, the Bureau of Economic Analysis reported that the economy shrank by nine-tenths of 1% in the second quarter of 2022. The number will be revised twice before the final figure is published in a month. The decline in the second quarter followed a decline of -1.6% in the first quarter. Still, the forecast from leading economists surveyed on July 17 by The Wall Street Journal is for about +1% growth for the four quarters through the end of 3Q 2023. 
The stock market discounted the bad economic news and may already have bottomed in anticipation of the growth forecast. The Standard & Poor’s 500 stock index closed at 4,130.29, gaining +1.42% Friday and +4.16% from last Friday’s closing price. The benchmark for America’s 500 largest publicly investable companies closed +59.45% higher than the March 23, 2020, bear market low and down 14.92% from the January 3rd all-time high. ​The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market-value weighted index with each stock's weight proportionate to its market value. Index returns do not include fees or expenses. Investing involves risk, including the loss of principal, and past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. ​​​​​​​​ Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. Product suitability must be independently determined for each individual investor. Tax advice always depends on your particular personal situation and preferences. You should consult the appropriate financial professional regarding your specific circumstances.
The material represents an assessment of financial, economic and tax law at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions.
This article was written by a professional financial journalist for Advisor Products and is not intended as legal or investment advice. |