One of the most reliable predictors of a president’s chances for re-election is change in personal disposable income in the 6-12 month period before Election Day. Ronald Reagan didn’t win re-election because he did a great job managing the economy for four years. He got re-elected despite a dismal economy for much of 1981-83, because personal disposable income (and related economic measures) soared in late 1983 and throughout 1984. Thus, “Morning In America”.
So, you know folks at Obama campaign headquarters in Chicago are smiling this morning when they look at these new estimates from the Bureau of Economic Analysis for economic performance in the 4th quarter of 2011. Mark Doms, chief economist for the Dept. of Commerce, runs the changes:
While the upward revision to GDP was welcome news, there was even better news in revisions to the income data…. More specifically, personal income growth was revised upward, from 0.8% to 3.2% in Q3, and from 2.6% and 3.2% in Q4.
As consumer spending wasn’t revised, this extra income implies that the personal saving rate was also revised upward in both quarters: from 3.9% to 4.6% in Q3, and from 3.7% to 4.5% in Q4.
These revisions to income and savings are significant because of the story they tell about the sustainability of the recent strength of consumer spending. The old story line was that some of the growth we saw in consumer spending in the second half of last year was fueled by a decrease in the saving rate. A challenge we then faced was the sustainability of future growth (since one can only lower the saving rate for so long). Today’s data show that the saving rate didn’t fall much and that the growth was instead fueled by higher incomes. I realize this is getting into the weeds a bit, but it really is quite good and important economic news.
It’s also quite good and important economic news for Pres. Obama’s chances of winning November’s election.
(h/t: Kevin Drum)
Crossposted at: http://masscommons.wordpress.com