Inflationary dynamics have brought about a large relative increase in real incomes over the last six months or so. 

Yes it looks as if much of the most recent improvement has not been “spent”, but it is only 1 or 2 months into this gap which must itself be set against strained income increases over the last decade.  Longer trends and frames remain important for the sustained growth rates over time and the current frame remains a weak one.  Personal consumption expenditures as a % of disposable income remain at historically high levels and consumer credit growth may also be a notably factor weighing against leeway for growth in consumption (see end of post).

Savings rates have blipped up….

But savings ratios are still historically low….

And while point in time nominal increases in disposable income look health…

Longer term average increases that account for volatility in the data show a weaker picture…

Current transfer receipts remain high…

And US population growth remains mired in a declining trend….

Breaking down the data we see relative strength of late in transfer receipts and income receipts on assets….

Yes we have had an increase in real incomes, an increase which has not yet been spent, but personal consumption expenditures as a % of disposable income were at a relatively high point and at current levels are still around 1990s expenditure level peaks…

But lest anyone thinks that the bounce in real earnings and the increase in “savings” has created legroom for increases in expenditure it is worthwhile remembering that consumer credit growth has also been important in providing the economy with a leg up and some of these relationships are starting to look extended: