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Friday, December 21, 2007

I Do Not Think That Word Means What You Think It Means

My title is a famous line from The Princess Bride, but it also applies to this dumbass take on personal spending from the Washington Post ...

Consumer Spending Surges in November
Consumers opened their wallets wider than expected as the holiday shopping season kicked off in November, boosting retail sales by the largest monthly amount in more than three years and helping Wall Street start the day on a strong note.

Sounds pretty good, right? Well, maybe you should read a little further ...
Incomes also rose in November, by 0.4 percent, double the rate of increase in October, although that was more than offset by increased prices, the department reported. Discounting for inflation, disposable personal income — the money left to spend after taxes — fell 0.3 percent (emphasis added).

So the fact is, incomes did NOT rise in November. Real income is the only income that matters, and real income was down. That's the number that should get the attention.

And while we're at it, that 1.1% increase in consumer spending that's in the first paragraph of the story? Also not adjusted for inflation. The real number is 0.5%.

And the primary driver of that 0.5% increase in consumer spending? Since incomes were down I suppose you can guess the answer, but you have to plow through to the tenth paragraph before the Post actually tells you: "The increase in spending came because consumers either borrowed or dipped into savings. The department reported that personal savings declined by more than $48 billion in November."

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