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Thursday, February 7, 2013

December 2012 Personal Income and Outlays, Retail Sales and Consumer Debt

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Bureau of Economic Analysis (BEA) data showed that personal income increased $352.4 billion (2.6 percent) and disposable personal income (DPI) increased $331.3 billion (2.7 percent) in December. Personal consumption expenditures (PCE) increased $22.6 billion (0.2 percent). Real (inflation-adjusted) DPI increased 2.8 percent while real PCE increased 0.2 percent. 

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The BEA indicated that the jump in personal income during November and December “was boosted by accelerated and special dividend payments to persons and by accelerated bonus payments and other irregular pay in private wages and salaries in anticipation of changes in individual income tax rates. Personal income in December was also boosted by lump-sum social security benefit payments.” Excluding those special factors, DPI increased by a much more modest $44.1 billion (0.4 percent) in December following an increase of $66.5 billion (0.6 percent) in November.
In other words, as Zerohedge.com put it, “it was all a forward pull in comp in December to avoid the tax hikes from the January 1 Fiscal Cliff. Sure enough, of the $352 billion increase in personal income, some $268 billion, or 76% was due to Personal Dividend Income which exploded by some 34.3% to $1.05 trillion as companies ‘dividended’ income like crazy to avoid what they expected would be a huge increase in the dividend income tax.” 

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The Census Bureau reported that consumers increased retail spending by 0.5 percent (seasonally adjusted) during December as higher auto sales overcame the drag from gas stations. On an unadjusted basis, sales rose 12.7 percent between November and December, led by general merchandise stores. 

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Total consumer debt outstanding (CDO) rose by a seasonally adjusted $14.595 billion (6.3 percent annualized) in December. Revolving (mostly credit card) debt decreased by $3.6 billion (-5.1 percent annualized), while non-revolving debt (mainly student and auto loans) increased by a record $18.2 billion (11.4 percent annualized). Federal student loans comprised approximately half of December’s increase in non-revolving debt. 

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Total CDO jumped by $150.8 billion (5.7 percent) during 2012, of which $148.3 billion (98 percent) was comprised of non-revolving loans; federal student loans increased by $109.4 billion (nearly three-quarters of the total CDO increase).
The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

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