Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       

Blog Home
   Brian Wesbury
Chief Economist
X •  LinkedIn
   Bob Stein
Deputy Chief Economist
X •  LinkedIn
  Personal Income Rose 0.4% in September
Posted Under: Data Watch • Government • Inflation • PIC • Fed Reserve • Interest Rates • Spending • COVID-19
Supporting Image for Blog Post


Implications:  Income, spending, and inflation all rose in September, as the U.S. economy continues the transition from a stimulus-fueled misadventure toward a slower path of growth. Today’s report is a great example of the shift from the shutdown-induced measures that mainly supported the goods side of the economy, back to the service side, which was discouraged (or outright prohibited) during the pandemic.  Consider for a moment that from February 2020 to December of that year, spending on goods rose by more than $300 billion, while spending on services fell by over $500 billion.  This government-induced shift caused a massive reallocation of resources: employees, consumer dollars, and investment.  Now, as we return to more “normal” spending patterns, the goods side of the economy is feeling the pain.  While consumer spending rose 0.6% in September, spending on goods rose a more modest 0.3% and follows declines of 0.8% and 0.4% over the prior two months.  This shift will bring with it some layoffs, inventory issues, and a host of other economic ills.  Meanwhile the services side of the economy was up a hearty 0.8% in September.  In addition to shifting what we could do and where we could do it, the stimulus checks, PPP loans, and extra unemployment benefits of 2020 and 2021 dramatically boosted consumer spending power, more than replacing lost wages.  That economic morphine, which was meant to dull the pain of shutdowns, has led to a multi-decade high in inflation and the economic pain that now comes with trying to get that inflation in check.  PCE prices – the Fed’s preferred measure of inflation – rose 0.3% in September and are up 6.2% from a year ago.  Core prices, which exclude food and energy, rose 0.5% in September and are up 5.1% from a year ago.  While energy prices will ebb and flow, core inflation is likely to remain higher for longer than most anticipate.  No, we are not in a recession yet, but the Fed is almost very likely to cause one as they try to undue the effects of the policy decisions made over the last two and a half years.  

Click here for a PDF version

Posted on Friday, October 28, 2022 @ 9:03 AM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2024 All rights reserved.