In a post by Shobhana Chandra and Jeanna Smialek at Bloomberg called Yellen Spending Mix lacks Ingredient of Higher Pay, there is a quote…Â
“It doesn’t “add up,†said Neil Dutta, head of U.S. economics at Renaissance Macro Research in New York. “Consumer confidence is at a cycle high, and consumption is declining. You also have a situation where real disposable income is rising significantly over the first five months of the year, and consumption is falling. It’s sort of like, which of these is not like the other?â€
Like I wrote elsewhere, as the stock market and housing market slow down, declining consumption by capital income will offset consumption gains by labor. This is how I would explain the dilemma. We have to wait a couple of months for the data to show this. But the puzzlement of Neil Dutta will have an explanation.
And today the Dow is back to hovering around 16,800, a level which I saw as the limit of the Dow back in April. It is sitting at 16,804 as I write this post. Stocks are stagnant. Stocks are not conducive to consumption by capital income which reached very high levels during the stock rise of the past two years.
