Real Disposable Income Up, But Inflation Still Too Hot

By SBE Council at 26 April, 2024, 6:32 pm

by Raymond J. Keating -

According to the latest personal income report from the U.S. Bureau of Economic Analysis, personal income grew in March, while inflation (as measured by the personal consumption expenditures (PCE) index) still ran too hot.

Personal income - seasonally adjusted but in nominal dollars - increased by 0.5 percent in March. That wound up being a real gain when PCE inflation was factored in at 0.3 percent.

Meanwhile, disposable income - that is, personal income less personal current taxes - increased in March by 0.2 percent in real terms. Disposable income ranks as the most important income measure as it is a measure of how much money individuals have to invest, save and consume.

On a per capita basis, real disposable income was up in March versus February, but, as noted in the following chart, has effectively been flat for the three months. In fact, it hasn't done much since May of last year.

Source: Federal Reserve Bank of St. Louis, FRED

Finally, on the inflation front, according to the PCE price index, it has been running at a hot annualized rate over the past three months of approximately 4.4 percent. That remains deeply troubling, of course, as inflation undermines investment, small businesses that face higher costs and interest rates, and consumers.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist, The Weekly Economist II:52 More Quick Reads to Help You Think Like an Economist and The Weekly Economist III: Another 52 Quick Reads to Help You Think Like an Economist.

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