Monday, September 29, 2008

Personal Income for August Indicates Consumer Recession

by Calculated Risk on 9/29/2008 08:36:00 AM

From the BEA: Personal Income and Outlays

Real DPI -- DPI adjusted to remove price changes -- decreased 0.9 percent in August, compared with a decrease of 1.5 percent in July.

Real PCE -- PCE adjusted to remove price changes -- increased less than 0.1 percent in August, in contrast to a decrease of 0.5 percent in July.
This report is strong evidence that the U.S. economy is in recession and that the change in Personal Consumption Expenditures (PCE) will be negative for Q3.

Although these numbers may be revised, or perhaps September was surprisingly strong (unlikely), based on the two month method, the change in real PCE in Q3 will be about minus 2.4%.

With PCE accounting for almost 71% of GDP, and real PCE declining in Q3, along with declining investment, the change in GDP for Q3 should be negative.