Spending > Incomes

We're spending more than we're making, and have been for awhile. It can't go on forever, right?

Random Walk is at a conference this week, so notes will be shorter and lighter.

• A mysterious observation about spending and incomes (or perhaps not that mysterious, but still an observation)

• locked-in on consumption

• savings rate can’t get much lower

• real estate wealth is appreciating like never before (right?)

• Helocs to the rescue

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Spending > Incomes

This observation continues to be a bit of a mystery to me:

Pantheon Macro

Using 2019 as a starting point, real consumption has been growing more than real incomes.

The trend really starts to get noticeable at the end of 2022.

Unsurprisingly, income-growth and consumption-growth tend to run together—if you make more money, you can spend more money. If you don’t make more money, but you spend more anyway, then you’ve got some explaining to do.

In this case, it looks like we’ve been spending more without making more for ~2 years.

The standard explanation for how that’s possible is “excess savings,” i.e. stimulus. If that’s the case, then those savings have to be exhausted at some point soon, at which point consumption should start to come down (unless incomes start to rise).

Random Walk supposes that there is, at least, some truth to that story (and perhaps a lot of truth), but still, it’s kind of weird.

Consumption lock-in