Previously we looked at US consumption trends in the second half of last year. Spending had outpaced incomes as the savings rate fell, and consumer credit expanded, leading to questions of “sustainability” and the like.
Well, apparently income growth and the savings rate were both meaningfully understated.
Barclays Capital economists have looked at the household income accounts in Wednesday’s revised Q4 GDP estimate from the BEA:
The household income accounts revealed more sizable revisions, and wholly positive ones.
Real disposable income growth was revised up to 1.4% from 0.8%, and to +0.7% from -1.9% in Q3. Encouragingly, this was fully driven by stronger wage and salary growth (rather than government transfer payments). It was revised up to 5.5% from 4.0% in Q4 and to 6.6% from 1.5% in Q3.
This resulted in upward revisions to the savings rate as well, now at 4.5% in Q4 and 4.6% in Q3 (previously 3.7% and 3.9%).
Click here to see our earlier post on the Fed staff’s efforts to understand consumer behaviour in recent years, and for a more Wicksellian approach to understanding the consumer, check out Karl Smith’s post.
As for GDP itself, we didn’t think the small revisions merited much attention (though as usual we’re looking forward to seeing the GDI figures when the third estimate is released) but here is the FT’s writeup and below is an intuitive chart from Econompic Data:
Related links:
US growth revised to 3 per cent – FT
US pent-up demand, charted – FT Alphaville