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In The USA, The Consumer Is The Economy

08/31/2011

Personal Consumption Expenditure (PCE) is the spending of consumers.   This spending is the order of magnitude of the size of GDP, and roughly 60% of PCE spending ends up being counted in GDP. In the USA, the consumer is the economy.

What a difference one month makes.  June 2011 data had us talking about a recession with three straight months of inflation adjusted PCE contraction.  Now the July 2011 data comes out with the largest increase since December 2009.

We’re still on thin ice though. Real personal income decreased 0.1 percent in July, in contrast to an increase of 0.3 percent in June. Real PCE increased 0.5 percent, compared with a decrease of less than 0.1 percent.

If these numbers appear squishy to you – I agree. Fluctuations are not giving way to a consistent trend. I’d say this is the kind of economic news we’ll be hearing into 2012.

Content for this post from Steven Hansen, Global Economic Intersection, August 29, 2011.

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