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Inflation consumes personal income.



Pay more to get less What American consumers want most during these difficult times.

By Wolf Richter for WOLF STREET

So we have a little situation here. We have a slight increase in inflation. I mean the highest inflation in three decades. And now all personal income from all sources. Including forecasts for free money from the fading sky, up 0.5% in April. Compared to April last year but adjusted according to the inflation rate. “Real personal income” fell 3.0% year-on-year. According to a report by the Bureau of Economic Analysis on Friday.

month-to-month and not adjusted for inflation. Personal income from all sources fell 13% in April from March to a seasonally adjusted annual rate of $21

.2 trillion – after a 21% increase in March for the historic, impulse-driven WTF period. Every wave of the three impulses produces a glorious overshoot, so from now on most of those impulses have been received and taken into account.

I stated that my total personal income increased by 0.5% year-on-year from all sources. not adjusted for inflation with the green line sloping upwards. In a moment, we’ll take a look at what the inflation-adjusted green line looks like.

Personal income from wages and salaries, not adjusted for inflation, rose 1.0% in April from March. and has a tendency to increase further in May as more consumers return to work and when employers raise wages to attract these people back enter the labor market This is the weirdest labor market ever. with a record high unemployment rate While 16 million people still claim state or federal unemployment compensation.

But then there’s inflation. And as a result, the purchasing power of “real” personal income collapses. All “real” personal income from all sources – adjusted for inflation and expressed in chained 2012 dollars – declines according to the Bureau of Economic Analysis. 3.0% year on year – hence the sloping green line:

Yes, Inflation – Declining Dollar Purchasing Power And as a result, the purchasing power of workers is declining – something that American consumers need most during these difficult times.

However, American consumers are willing to maintain the global economy. in March Consumer spending on durable and non-durable goods has skyrocketed from the historical proportion of WTF. It created an unprecedented trade deficit due to the large amount of imports of these goods or their components and materials. But service spending remains sadly lagging behind.

in April Some consumers are still being assessed and spending. and other consumers Take the precautions they took in March. And overall spending in April was near WTF levels in March. But what we see now is the effect of inflation.

March and April were the first two consecutive months in three decades when big inflation has cropped up in the data. It’s time to see how it works.

“Real” spending on durable goods dropped 0.9%. in April from March But not adjusted for inflation, it rose 0.5%, which included a significant increase in the price of used and new cars.

“Real” spending on non-durable goods dropped 1.6%. in April from March Unadjusted for inflation, it fell 1.3%.

“Real” spending has increased 0.6% in April since March fromBut not adjusted for inflation, it rose 1.1%, while spending on goods hit a record high. But spending on services From plane tickets and hotel bookings to backwards rentals. in April Actual spending on services occurred in late 2017.

Overall, “real” consumer spending on all goods and services fell 0.1%.But if it’s not adjusted for inflation, then it’s a 0.5% increase. You get a drift. Consumers spend more to get less:

Everyone now has their own laundry list of goods and services that suddenly become much more expensive. or the same price But the product is smaller or the quality is reduced or combined. Smart consumers have been reporting this for months. But in March and April The information began to appear in earnest.

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