Inflation Alert! Bureau Economic Analysis (BED) data shows Consumers & Governments Embark on Epic Spending Binge!
The PCE price index (the Fed's barometer for inflation and insists is going back to 2%) increased 4.9% in the first quarter of 2023, compared to +4.4% in the 4th quarter of 2022.
Source: https://www.bea.gov/sites/default/files/2023-04/gdp1q23_adv.pdf
Highlights:
Real gross domestic product (GDP) increased at an annual rate of 1.1 percent in the first quarter of 2023.
- In the fourth quarter, real GDP increased 2.6 percent.
- The increase in real GDP reflected increases in consumer spending, exports, federal government spending, state and local government spending, and nonresidential fixed investment that were partly offset by decreases in private inventory investment and residential fixed investment.
- Imports, which are a subtraction in the calculation of GDP, increased.
The increase in consumer spending reflected increases in both goods and services.
- Within goods, the leading contributor was motor vehicles and parts.
- Within services, the increase was led by health care and food services and accommodations.
- Within exports, an increase in goods (led by consumer goods, except food and automotive) was partly offset by a decrease in services (led by transport).
- Within federal government spending, the increase was led by nondefense spending.
- The increase in state and local government spending primarily reflected an increase in compensation of state and local government employees.
- Within nonresidential fixed investment, increases in structures and intellectual property products were partly offset by a decrease in equipment.
- The decrease in private inventory investment was led by wholesale trade (notably, machinery, equipment, and supplies) and manufacturing (led by other transportation equipment as well as petroleum and coal products).
- Within residential fixed investment, the leading contributor to the decrease was new single-family construction.
- Within imports, the increase reflected an increase in goods (mainly durable consumer goods and automotive vehicles, engines, and parts).
- Compared to the fourth quarter, the deceleration in real GDP in the first quarter primarily reflected a downturn in private inventory investment and a slowdown in nonresidential fixed investment.
Current-dollar GDP increased 5.1 percent at an annual rate, or $327.9 billion, in the first quarter, to a level of $26.47 trillion.
- In the fourth quarter, GDP increased 6.6 percent, or $414.1 billion
- The price index for gross domestic purchases increased 3.8 percent in the first quarter, compared with an increase of 3.6 percent in the fourth quarter
The PCE price index increased 4.2 percent in the first quarter, compared with an increase of 3.7 percent in the 4th quarter.
- Excluding food and energy prices, the PCE price index increased 4.9 percent in the first quarter, compared with an increase of 4.4 percent in the 4th quarter.
- Remember, this is the number the Fed insists they are going to raise rates unless and until it gets back to 2%
Personal Income:
- Current-dollar personal income increased $278.9 billion in the first quarter, compared with an increase of $398.8 billion in the fourth quarter.
The increase in the first quarter primarily reflected increases in compensation (led by private wages and salaries) and government social benefits.
- The increase in Social Security primarily reflected an 8.7 percent cost-of-living adjustment that took effect in January.
Disposable personal income increased $571.2 billion, or 12.5 percent, in the first quarter, compared with an increase of $403.0 billion, or 8.9 percent, in the fourth quarter.
- The increase in the first quarter reflected an increase in personal income and a decrease in personal current taxes.
- Real disposable personal income increased 8.0 percent in the first quarter, compared with an increase of 5.0 percent in the fourth.
- Personal saving was $946.2 billion in the first quarter, compared with $758.8 billion in the fourth quarter.
- The personal saving rateโpersonal saving as a percentage of disposable personal incomeโ was 4.8 percent in the first quarter, compared with 4.0 percent in the fourth.
TLDRS:
- Real gross domestic product (GDP) increased at an annual rate of 1.1 percent in the first quarter of 2023.
The PCE price index increased 4.2 percent in the first quarter, compared with an increase of 3.7 percent in the 4th quarter.
- Excluding food and energy prices, the PCE price index increased 4.9 percent in the first quarter, compared with an increase of 4.4 percent in the 4th quarter.
- Remember, this is the number the Fed insists they are going to raise rates unless and until it gets back to 2%
- Folks have money and are spending! Disposable personal income increased $571.2 billion, or 12.5 percent, in the first quarter, compared with an increase of $403.0 billion, or 8.9 percent, in the fourth quarter.
- The increase in the first quarter reflected an increase in personal income and a decrease in personal current taxes.
- Real disposable personal income increased 8.0 percent in the first quarter, compared with an increase of 5.0 percent in the fourth.
