With this morning’s release of the May Personal Incomes and Outlays we can now take a closer look at“Real” Disposable Personal Income Per Capita.
The first chart shows both the nominal per capita disposable income and the real (inflation-adjusted) equivalent since 2000. This indicator was significantly disrupted by the bizarre but predictable oscillation caused by 2012 year-end tax strategies in expectation of tax hikes in 2013.
The May nominal 0.40% month-over-month increase shrinks to 0.17% when we adjust for inflation. The year-over-year metrics are 3.54% nominal and 1.74% real.
The BEA uses the average dollar value in 2009 for inflation adjustment. But the 2009 peg is arbitrary and unintuitive. For a more natural comparison, let’s compare the nominal and real growth in per capita disposable income since 2000. Do you recall what you were doing on New Year’s Eve at the turn of the millennium? Nominal disposable income is up 58.2% since then. But the real purchasing power of those dollars is up only 19.7%.
Here is a closer look at the real series since 2007.
Year-Over-Year DPI Per Capita
Let’s take one more look at real DPI per capita, this time focusing on the year-over-year percent change since the beginning of this monthly series in 1959. I’ve highlighted the value for the months when recessions start to help us evaluate the recession risk for the current level.
Of the eight recessions since 1959, five started with a YoY number higher than the current reading. However, the volatility of Real DPI militates against putting very much emphasis on this metric. I’ve highlighted a number of conspicuous tax planning blips as well as Microsoft’s big dividend payout in 2004.
Suffice to say that we need this indicator to show continuing improvement in the months ahead.
The Consumption versus Savings Conflict
The US is a consumer-driven economy, as is evident from the percent share of GDP held by Personal Consumption Expenditures.
