As part of its historical revision to GDP, the BEA also had to adjust personal income and spending, with the full results released in today's July report. What it revealed was striking: over the revised period, disposable personal income for US household was slashed cumulatively by over $120 billion to just under $14.4 trillion, while spending was revised higher by $105 billion, to just above $13.8 trillion. There were two immediate consequences of this result.

First, as the following table shows, while government pay has remained roughly flat over the past 3 years, growing in the mid-2% to mid 3% range, wages and salaries for private workers have been steadily declining as the blue line below shows, and after hitting a 4% Y/Y growth in February, wage growth has slumped to just 2.5% in June, the lowest since January 2014 when excluding the one-time sharp swoon observed at the end of 2016.

But a more troubling aspect of today's revision is what the drop in income and burst in spending means for the average household's bank account: following the latest annual revision, what until last month was a 5.5% personal saving rate was revised sharply lower as a result of the ongoing downward historical adjustment to personal income and upward adjustment to spending, to only 3.8%.



In dollar terms, this revision means that a quarter trillion dollars, or $226.3 billion, in savings was just "wiped away" from US households - if only in some computer deep in the bowels of the BEA buildings - who as a result have that much less purchasing power, and following the revision the total personal saving in the US as calculated by the BEA is now down to only $546 billion, down from $791 billion before the revision.

This means that either households will have to incur this much incremental debt to continue on the previous spending "trendline", or a quarter trillion in potential growth from the future economy (recall 70% of US GDP is the result of consumer spending), has just been chopped off.

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