March 1, 2024

Economix: The Pinch of Food and Gas

Bureau of Economic Analysis, via Gluskin Sheff

5:38 p.m. | Updated with 20-year chart

Anyone who shops at the grocery store or fills up at the gas station has felt the pinch for several weeks now, and confirmation came earlier this week in the Commerce Department’s personal-income figures. They showed that real disposable income fell 0.1 percent, largely because of food and gas inflation.

David Rosenberg, chief economist and strategist for the investment firm Gluskin Sheff Associates, ran the numbers another way and found that more than 22 percent of wages and salaries were being spent on food or gas. That, he writes in his daily newsletter, is a level seen only twice previously since 1990. “Both ultimately landed the economy into recessions that ensnared discretionary household spending,” he writes.

Certainly, with real incomes falling and the prices of basic goods rising, this might not bode well for consumer spending and in turn, the fragile recovery.

The upside? “A new bull market in frugality, ‘trade down’ goods and private label is likely on its way again,” Mr. Rosenberg writes.

This post has been revised to reflect the following correction:

Correction: March 29, 2011

An earlier version of this post referred imprecisely to the precedents for the current level of wages and salaries spent on food and gas. The current level has been reached twice previously since 1990.

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