Personal Income Drop May Be Skewed By Subsidies Dip

Jan. 13, 2005
Compiled By John S. McClenahen The biggest danger in October's reported $16.5 billion drop in U.S. personal incomes is in overinterpreting the figure, asserts Gordon Richards, chief economist at the National Assn. of Manufacturers, Washington. "The ...
Compiled ByJohn S. McClenahen The biggest danger in October's reported $16.5 billion drop in U.S. personal incomes is in overinterpreting the figure, asserts Gordon Richards, chief economist at the National Assn. of Manufacturers, Washington. "The income data were distorted by one-time factors, mainly [a sharp drop in] federal agricultural subsidies, which made the report look worse than it actually is," he says. Indeed, if the distortions are excluded, "then wage and salary disbursements, which are a better indicator of the trend in personal incomes, actually increased by $30.6 billion." Richards' bottom line: Hampered somewhat by relatively high debt, consumers won't be spending as freely for Christmas this year. However, the buying season won't be terrible, either.

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