Personal Income And Spending Numbers Disappoint

Today, the Commerce Department released November's personal income and spending results. Oddly, most articles I've seen this morning are celebrating that last month's personal income growth was the biggest gain in six months. If you look a little deeper, however, the numbers aren't very impressive.

For starters, today's numbers didn't live up to expectations. According to the Wall Street Journal, although personal income grew by 0.4% in November (the biggest increase in six months), economists expected a 0.5% increase. The story is the same for spending. It increased by 0.5%, while economists predicted a 0.6% increase.

But these numbers don't tell the whole story because inflation isn't taken into account. In real dollars, those increases look far less impressive. The chart below from the news release includes inflation-adjusted numbers in "Chained (2005) dollars":

As you can see, November's disposable person income growth actually matched September and October at a meager 0.2% when inflation is taken into account. And spending growth was actually worse in November than October, only growing 0.2%, compared to 0.4% in October.

If you look a little deeper into the report (.pdf), you find that November's inflation-adjusted personal income was actually 0.8% lower than May's statistic. Similarly, November inflation-adjusted disposable personal income was 1.3% lower than in May.

That's not to say that it couldn't be worse. Obviously, if income and spending were trending further down, then that would be quite alarming. But the claim that income and spending appear to be leading a recovery doesn't quite ring true when you look at the real numbers that take inflation into account. These statistics appear stagnant at this point.