Making Sense Of The Latest Economic Data

Key Takeaways:

• At the individual level, sometimes economic data doesn’t make sense. 
• The Juice considers reasons why. 
• At day’s end, all you can do is worry about and insulate yourself as much as possible. 

Consider some of the latest economic data you see gracing the headlines: 

• Personal income and personal disposable income both increased 0.5% in May. 
• Spending on services increased $76.2 billion in May, while spending on goods decreased $43.5 billion. 
• The personal savings rate was 5.4% in May, up from 5.2% in April, but down from 8.7% in December. 

Here’s the breakdown of total personal savings:

• Credit card balances jumped 20% between March and April to $841 billion. 
• Total household debt hit an all-time record of $15.84 trillion. 

We could keep going, but you get the point. 

The Problem With Economic Data 

Here’s the problem – or the problems – with widely reported economic data: 

• It captures a moment in time. 
• That moment in time varies depending on who is collecting and reporting the data. 
• Different agencies and entities used different methods to collect, analyze, and report data. 
• Sometimes the data you see doesn’t come from the government. It’s based on surveys, which often rely on self-reported data. 

And so on. 

Here’s what The Juice thinks might be true about the data we included here:

• Consumers spent a lot of money on goods – things like food, clothing, and appliances – during the stay-at-home portion of the pandemic. 
• As the opportunity to do things out of the house came back, they shifted some of that spending to services. Going out to eat, traveling, and such. 
• As inflation took hold, goods became even less attractive, so the shift to spending on services intensified. People made choices with their money. Like always. 

A Tale Of Two Very Different Consumers

From there, how do you explain relatively healthy savings alongside increasing and record debt? 

Some consumers probably carry both, not wanting to part with cash (think cash security) to pay down debt. 

However, The Juice thinks it might be even more straightforward than that. 

There are households doing super well – maybe folks who actually could afford to buy a house in the last year. They have cash saved and little debt outside of that 30-year mortgage they just took on. Maybe they did so well on stocks and crypto they don’t have a mortgage or they made a healthy down payment. 

Then, there are households struggling. Living paycheck to paycheck. They blew through their pandemic stimulus. As their savings run dry, they turn to credit cards to cover necessities and, most definitely, discretionary spending. 

If and when the bubble bursts on the latter group – and The Juice thinks it will – the headlines will scream debt crisis. However, if you’re in the doing super well group, you’ll wonder what all the hysteria is about. 

The Bottom Line: Personal finance is personal. Now more than ever. 

You hear a lot about the haves and haves not. The rich getting richer. The poor getting poorer. We might be living through the thick of this phenomenon right now. How else do you explain seemingly contradictory data beyond methodological differences? 

You can’t. And you shouldn’t try to. At least not for a living. Leave that to us. 

Consider yourself lucky if you’re in a position to make the choice to part with savings to pay off debt. Or to, better yet, be debt-free to begin with. That’s a surefire way to get your house in order – resist taking on debt, particularly when it’s as expensive as it is now.