Slowing Growth In Income = Slowing Pace Of Spending?

Michael Panzner
updated | Author's Website

Based on the latest data (reported earlier today), the rate of growth in year-on-year personal income has fallen below that of personal spending, with the ratio of the former to the latter hitting its lowest level since June 2010.

Personalincomevsonsumption

Simply put, unless household income is poised for an imminent jump — which would seem to require a significant and sustained boost in new hiring in the absense of any “quick fix” stimulus programs — this development suggests that the already languid pace of consumer spending (especially when viewed in real, or inflation-adjusted, terms) is set to be dragged even lower.

Of course, details like this don’t really matter to equity traders, who’ve been buying shares in the consumer discretionary sector like there’s no tomorrow.

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