by Bill McBride on 5/06/2010 01:02:00 PM
Thursday, May 06, 2010
This is a theme I've probably already pounded into the ground ... but here is some more from the Atlanta Fed's Economic Highlights:
Click on graph for larger image in new window.
This graph is from the Altanta Fed and shows the month-to-month increase in government transfer payments (green) and the change in real personal income less transfer payments (flat red line).
From the Atlanta Fed:
The major contributor to income growth during the past several months has been transfer payments.We could take this a step further ... the following table shows month-to-month increase in transfer payments and the month-to-month reduction in personal saving - and then compares to the month-to-month increase in Personal Consumption Expenditures (PCE). Note: all numbers are annual rates.
|Monthly Increase, Billions (SAAR)||Jan-10||Feb-10||Mar-10|
|Government Transfer Payments|
|Old-age, survivors, disability, and health insurance benefits||-1.5||3.1||5.1|
|Government unemployment insurance benefits||-6.6||-2.2||11.8|
|Reduction in Personal saving||55.1||54||28.2|
|Total Saving Reduction and Transfer Payments||80.7||61.3||52.9|
|Increase in Personal outlays||34.4||58.3||60.6|
This shows that the entire increase in consumption in Q1 was due to transfer payments and reductions in the saving rate (now down to 2.7% in March). I suppose the saving rate could go to zero - although I expect it to increase, maybe incorrectly! - but at some point increases in consumption are going to have to come from jobs and income growth, not government transfer payments and reductions in the saving rate.