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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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