Tuesday, August 05, 2008

Economic Stimulus Boosts Real Disposable Income

According to yesterday's BEA report (Table 10), real disposable personal income increased in June by 3.4% compared to June last year, following a 6.4% annual increase in May (see chart above). Both growth rates (May and June) were above the 2.6% average growth in real disposable income since 2001, following 7 months (October 2007 to April 2008) of below-average growth (see chart above).

On a monthly basis, the June growth in real personal disposable income was negative at -2.6% (from May), but only because May growth was so high (+5.7% monthly growth from April, and 6.4% annual growth from May 2007).

Although real disposable income growth showed weakness in the last quarter of 2007 and the first quarter of 2008, the above-average annual growth rates of 6.4% (May) and 3.4% (June) suggest that the economy showed positive signs of income growth in the second quarter, largely due to the the Economic Stimulus Act of 2008. According to the Joint Committee on Taxation and the Congressional Budget Office, "rebates to individuals are expected to total $106.7 billion for 2008. The majority of rebates were sent during the initial round of payments, which began April 28, 2008, and will continue on a weekly basis through mid-July 2008."


At 8/05/2008 3:47 PM, Blogger spencer said...

If the committee uses real personal income why are you showing real disposable income that is strongly influenced by the tax rebate?

At 8/05/2008 3:53 PM, Blogger Mark J. Perry said...

Sorry, thanks Spencer.


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