Our Drunken Sailors earned and saved a lot more than we thought, spent more too, causing substantial up-revisions to post-pandemic GDP.

By Wolf Richter for WOLF STREET.

This might explain in part why consumers have held up so well: They made a lot more money, and they saved a much larger portion of it, and they spent more too than we thought. The Bureau of Economic Analysis today released its revised figures for inflation-adjusted consumer income, spending, and the savings rate going back several years. And so we’re going to get our special tu-tone charts, red for the revised data through August and blue for the unrevised data through July. Brace yourself.

Personal income without transfer receipts, adjusted for inflation:

• Revised version for August: +3.1% year-over-year.
• Revised version for July: +3.2% year-over-year.
• Old version for July: +1.6% year-over-year.

This is income from wages, interest, dividends, rental properties, farm income, small-business income, etc., but excludes government transfers, such as Social Security benefits, unemployment insurance benefits, Welfare, etc.

And this: over the two years between July 2022 and July 2024, personal income without transfer receipts adjusted for inflation:

• Revised version: +6.0%
• Old version: +3.6%!

Disposable income, adjusted for inflation:

• Revised version for August: +3.1% year-over-year
• Revised version for July: +3.2% year-over-year
• Old version for July: +1.1% year-over-year.

For the two years from July 2022 through July 2024, adjusted for inflation:

• Revised version: +8.5%
• Old version: +5.5%.

Disposable income is income from all sources after income taxes and social insurance payments. It includes income from wages and salaries, interest, dividends, rentals, farms, personal businesses, etc., and from transfer payments from the government, but excludes capital gains. Disposable income is what consumers have left to spend on goods and services and to save.

In terms of the year-over-year percentage change of inflation-adjusted disposable income: The last five revised increases (April-August) were over 3.1%, about triple the unrevised increases over the April-July period of around 1%.

The revised increase of disposable income has been outrunning inflation by a wide margin for about two years. The unrevised increase over the same period also outran inflation, but not by as wide a margin.

Consumer spending adjusted for inflation:

Oh deary, our Drunken Sailors as we lovingly and facetiously have come to call them around here – was also revised higher, but by a much smaller amount.

• Revised spending for August: +2.9% year-over-year
• Revised spending for July: +2.8% year-over-year
• Old version for July: +2.7% year-over-year.

Over the two years from July 2022 through July 2024, the inflation-adjusted revised consumer spending rose by 5.6%. The old version over the same period rose by 5.3%.

And the savings rate, oh-la-la.

What, our Drunken Sailors were party poopers? Income was revised up massively, and spending was revised up only a little, and so the savings rate – the percentage of the disposable income that our Drunken Sailors didn’t spend – was much bigger than we thought.

The savings rate in August was 4.8%. The revised savings rate for July was 4.9%. The old version of the savings rate for July was just 2.9%. This is a huge difference:

GDP too.

These revisions also made it into the GDP figures going back to the pandemic, and GDP increased much faster over those two years than we’d thought.

As a result, in Q2 2024, revised GDP, adjusted for inflation, was $305 billion higher than the old version. Since the end of 2021, revised real GDP grew by 5.8%; the unrevised version showed 4.9% growth over the same period.

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