Friday, August 29, 2008

Real Disposable Income Up By 11.4% in QII

According to today's BEA report (Table 10), real disposable personal income increased in July by 1.2% compared to July last year, following a 3.4% annual increase in June and 6.3% 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 July growth in real personal disposable income was negative at -1.7% (from June).

Although real disposable income growth showed weakness in the last quarter of 2007 (0.6%) and the first quarter of 2008 (-0.7%), the above-average, year-to-year growth rates of 6.3% (May) and 3.4% (June) contributed to an 11.4% increase in real disposable income during the second quarter 2008 (see Table 6), one of the biggest quarterly increases in history
, 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."

7 Comments:

At 8/29/2008 9:54 AM, Blogger spencer said...

You do know that it is up because of the tax rebates, don't you?

 
At 8/29/2008 9:58 AM, Blogger Mark J. Perry said...

Yes, please see update.

 
At 8/29/2008 10:48 AM, Blogger Walt G. said...

Should money received from going into debt be counted as income? Even the IRS does not make me count a $1000 cash advance on my Visa card as income. Accordingly, it would seem to me, that the tax rebates need to be subtracted before any comparative analysis can be made.

 
At 8/29/2008 11:03 AM, Blogger bob wright said...

Are transfer payments included in this?

If so, you would have to remove them as well, including tax "rebates" paid to low income households that paid no taxes.

 
At 8/29/2008 11:13 AM, Blogger Walt G. said...

bob wright,

Usually the GAAP rule of conservatism does not allow that. For example, potential loses anticipated from lawsuits are counted, but potential gains are not. Worst case scenarios are typically reported. I’m not an accountant; however, I know some of the rules. Full disclosure in footnotes should not be an alternative to objective accounting.

 
At 8/29/2008 5:03 PM, Anonymous QT said...

It would not be correct to record potential gains. Gains are not realized until they are crystalized when assets are sold.

We would not consider price appreciation in a rising housing market to be income either.

 
At 8/29/2008 11:31 PM, Blogger OBloodyHell said...

> We would not consider price appreciation in a rising housing market to be income either.

That's not how the media have reported it, LOL.

"That lost on-paper-only 'value' is lost, lost, LOST, I TELL YOU!! All thanks to GWB, that imperial bastard!! In order to line the pockets of Chimpy McBushaliburtoncheney, Those poor (sniffle, choke!) poor (sob, sob) people will be eating cornstarch packing peanuts for Christmas dinner(whimper)!!"

(8-X

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;-P

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