Slowing Income Suggests Economic Weakness Ahead
Posted May 15, 2024
A slowdown in the growth of Disposable Personal Income is pointing to economic weakness ahead.
Disposable Personal Income growth is slowing and is likely to continue to slow. This is important because Disposable Personal Income (DPI) finances Personal Consumption Expenditure which makes up 68% of US GDP. Therefore, the slowdown in DPI growth suggests that economic growth will slow as well during the months ahead.
The new Macro Watch video lays out all the details. It shows that DPI growth is weakening because all five of the constituent parts contributing to Personal Income are expanding at a slower pace, while, at the same time, individual tax payments have increased.
The video explains that growth in Personal Consumption Expenditure is also likely to be dragged lower by the depressed Personal Savings Rate which has fallen to an exceptionally low level thanks, in part, to the spike in Personal Interest Expense brought about by high interest rates.
If these factors continue to act as a drag on Personal Consumption Expenditure, as appears likely, the Fed may soon cut interest rates by more than the markets currently expect.
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This video is 17 minutes long and contains 39 slides that can be downloaded.
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