Real disposable personal income (DPI) per capita in the United States declined from $46,985 to $45,356 in the past 12 months, according to data released today by the U.S. Bureau of Labor Statistics. Consumer buying power shrunk by -3.5%.

Here’s the breakdown of income and spending, crucial factors in the consumer driven economy of the U.S: Disposable personal income was up +3.3% compared to June 2021 – before adjusting for inflation.

Inflation, as measured by the Personal Consumption Expenditure Deflator (PCED), soared +6.8% in the same 12 months, leading to the shrinking buying power. 

Personal outlays rose +8.4%, largely because of inflation, while the savings rate, at +5.1%, in the same 12-month period, fell below its pre-Covid level. 

It means Americans are using an increasing amount of their monthly income and saving less to cover monthly expenses, which have risen because of inflation. 

On Thursday, the Bureau of Economic Analysis reported that the economy shrank by nine-tenths of 1% in the second quarter of 2022. The number will be revised twice before the final figure is published in a month. The decline in the second quarter followed a decline of -1.6% in the first quarter. Still, the forecast from leading economists surveyed on July 17 by The Wall Street Journal is for about +1% growth for the four quarters through the end of 3Q 2023. 

The stock market discounted the bad economic news and may already have bottomed in anticipation of the growth forecast.

The Standard & Poor’s 500 stock index closed at 4,130.29, gaining +1.42% Friday and +4.16% from last Friday’s closing price.

The benchmark for America’s 500 largest publicly investable companies closed +59.45% higher than the March 23, 2020, bear market low and down 14.92% from the January 3rd all-time high.

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