On Friday the Bureau of Economic Analysis released its latest consumer income and expenditure data for March. The month-on-month increase in expenditure of 0.6% outpaced the 0.5% increase in income for the second consecutive month and the seventh time in the last nine months.
The Consumer Price Index and Advance Retail Sales data suggested that consumers were paying more for food and energy, but we can finally quantify how much, and it is not a pretty picture.
The biggest, and for us most important number was the percentage of personal expenditure spent on gasoline which came to 4.16%, its highest point since September 2008.
On the other hand, the percentage spent on food dropped from 7.77% to 7.73% despite a 0.70% increase in the consumer price index for food, the largest since July 2008 and the fifth largest increase ever recorded. In fact, of the four larger increases in CPI, none have seen the index on food drop as it did in March.
The consumer can buy cheaper food, but not cheaper gasoline — were funds diverted from grocery stores to gasoline stations? Not only is that unsustainable, it may be ultimately ineffectual.
In today’s issue of The Schork Report we illustrate the total percentage of expenditure on food and gasoline combined. In March, it rose to 11.89%, the last time we hit this level on the way up was December 2007. That same month the great recession began.
On the income side, the picture is better, but not by much. Total income stands 5.3% higher YoY, the first time that we have crossed above pre-recession surplus levels (excepting an outlier dip in December 2005, the smallest YoY change in personal income between January 2004 and January 2008 came to 5.2%).
Yet in cumulative terms we are lagging badly — in the twenty-four months preceding the start of the recession, income rose by 13.27%. In the previous twenty-four months, income has risen by just 8.26%.
Put simply, the amount we are spending on food and gas has increased faster than the runup to the recession, yet the increase in income has been slower. Higher efficiencies and consumption choices prolong the clock, but we question how much longer the disparity can last.
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Stephen Schork is the Editor of The Schork Reportand has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.