the internet has been slow this week; most of us who live out here have noticed slower loading pages, especially for email and those pages with pictures; personally, videos have been practically impossible, with viewing interrupted by long pauses, and even simple .jpg charts pasted into an email draft often take a few seconds to appear, even though there has been no apparent problem with text…this is all apparently the result of the largest distributed denial of service (DDoS) attack ever recorded, and has affected users in most of the US and Europethe attack has originated with the web hosting firm Cyberbunker, located in the Netherlands, which hosts less than reputable web activities such as spamming and unrestricted access to copy-written materials and is believed to have been the host for Wikileaks; the object of their ire is a anti-spam corporation called Spamhaus, who offers anti-spam software to providers, & who earlier this month blacklisted the Cyberbunker servers, provoking the attack

FRED Graph

the first economic release we’ll look at is the February report on Personal Income and Outlays from the Bureau of Economic Analysis, important because personal spending accounts for 70% of the economy….BEA reported February gross personal income increased $143.2 billion, or 1.1% over January’s level, and disposable personal income (DPI), which is income after taxes, increased $127.8 billion, also 1.1% above a January report that saw a 4.0% decline, the largest hit to incomes in 20 years precipitated by the fiscal cliff related tax cuts and reversal of year end tax avoidance schemes…real DPI, which is disposable income adjusted for inflation, rose 0.7%, after also being down 4.0% in January….our adjacent FRED graph shows the monthly changes in real DPI marked by tiny blue triangles; we have now seen real DPI fall 0.2% in October, rise 1.2% in November, when the distortions from the tax related income manipulation and shifting actually began, rise again 2.7% in December, then fall -4.0% in January, and come back up again 0.7% with the current report, yielding us approximately a total 0.4% increase over those 5 months; with any luck, reports going forward should return to a normal, unmanipulated trend…of the gross incomes increase of $143.2 billion in February, $42.4 billion came from wages and salaries (reversing their $42.7 billion decline in January), $12.6 billion was the increase in income to business proprietors, while farmers’ income increased $4.8 billion;  $9.9 billion was an increase in rental income, transfer receipts increased $9.0 billion, and $68.9 billion was the increase in dividends and income received on assets…on the spending side of the ledger, personal consumption expenditures (PCE) increased $77.2 billion, or 0.7% in February; real PCE, which is adjusted for inflation, rose 0.3%; the monthly changes for that measure are marked in red on our chart….personal spending on durable goods, such as cars and appliances, slipped from a seasonally adjusted annual rate of $1,277.3 billion in January to $1,276.9 billion in February  spending on non-durable goods, which could include anything from soap to gas, rose from $2,584.6 billion to $2,633.1 billion, and spending on services, which could include everything from a taxi fare to a hospital stay, increased from $7,452.8 billion to a $7,481.8 billion annual rate..total personal outlays, which includes PCE, interest and transfer payments, rose $79.4 billion in February, compared with an increase of $42.8 billion in January; personal savings, which is DPI less outlays, were $310.9 billion in February, compared with $262.5 billion in January; the personal saving rate, which is savings as a percentage of DPI, rose to 2.6% in February from the 2.2% rate in January, but was the second lowest monthly savings since November 2007the price index for personal consumption expenditures, which is the measure targeted by the Fed, increased 0.4% in February, while the Core PCE price index, which omits food & energy, was up just 0.1%; in contrast to the Consumer Price Index and Core CPI, which both showed one year price increases of 2.0%, the PCE price index and Core PCE index are both at 1.3% year over year

when looking at a report such as this we have to be aware that the totals for personal income are just aggregates, and the purpose of a report such as this is to gauge the impact of the change in those aggregates on the economy; so while the totals for disposable income are in a general uptrend, it doesnt necessarily mean the typical worker is seeing that in his paycheck; for instance, much of the big jump in December DPI was caused by "accelerated and special dividend payments and by accelerated bonus payments"…one way of gauging what the income changes are for the average worker is to divide the aggregate by the population, to give us a per capita figure, which you’ll see in the chart to the left below; the red line charts the per capita growth in DPI since 2000, when it was below $26,000, thru this report, where DPI per capita is over $38,000…the blue line adjusts DPI per capita for inflation set to 2005 dollars; by that metric, we’re only up 0.2% per capita since this month last year, and still stuck at the real personal income levels per capita first seen in December 2006…but that still doesnt tell us much about how the average worker is making out, cause that per capita average could include a number of those with inflated incomes, such as the top 25 hedge fund mangers who take in $22.07 billion a year; fortunately, we have a few other reports and analysis out this week that will provide a clearer picture; first, the 2013 Economic Report of the President (pdf) gives us an average weekly wages in 1982-84 dollars for production and non-supervisory workers, who comprise about 80% of the private workforce; according to that, real wages for those real workers fell from $295.49 to $294.83 per week in 2012, about 0.2%; but even worse, those wages are down 14% from the 1972 inflation adjusted peak of $341.73 set in 1972…meanwhile, analysts at Sentier Research, who were formerly Census officials and use Census data to produce monthly reports, released their analysis of US median incomes for February (pdf)…they find the median annual income in the US to be down to $51,404 in February, about 1.1% lower than January’s $51,994, down 6% since the recovery started, down 7.3% since the beginning of the recession, and down 8.4% since they started keeping records in 2000, all of which you can see on the median household income chart from Sentier to the right below…and in yet another analysis of income growth,by tax analyst and Pulitzer Prize-winning journalist David Cay Johnston, he finds that the adjusted gross income of the bottom 90% of us fell to $30,437 per taxpayer in 2011, only $59 more than the average adjusted gross income in 1966, while the average adjusted gross income for the top 10 percent rose by $116,071 to $254,864; even more spectacularly, the top 1 percent alone collected 81% of all the income gains over those 45 years, and the top 1% of the 1 percent, those 15,837 households making over $7.97 million in 2011, picked up 39% of all the income gains since ’66 in the US by themselvesFRED Graph

Source: Sentier Research analysis of Labor Department data. Note that vertical axis does not start at zero to better show the change.

the Bureau of Economic Analysis also released the 3rd and final estimate for 4th quarter GDP, and with it, the last revision to GDP for 2012 and corporate profits for both the quarter and the year as well…the BEA found a 0.4% annual rate of change in the nation’s output of goods and service between the 3rd and 4th quarter, not the 0.1% reported last month, nor the 0.1% contraction they reported at the end of January; based on more complete data than available in their earlier reports, the BEA found that nonresidential fixed investment had increased 13.2% in the quarter, more than the 9.7% they first guessed, and exports declined 2.8%, less than the 3.9% they previously estimated; partially offsetting that was a decrease in the gain in personal consumption expenditures from 2.1% to a final estimate of 1.8% higher than the 3rd quarterthe inset table shows how each of the 4 major components of GDP changed from the 2nd estimate last month to the current estimate, and what each contributed or subtracted from 4th quarter growth…as mentioned, consumption increased at an annual rate of 1.8%, and, as it’s 70% of GDP, added 1.28% to the 4th quarter growth rate; purchases of durable goods rose 13.6%, while spending for non-durables was up at a  rate of just 0.1%, and spending for services was 0.6% higher than the 3rd quarter…of the investment components, nonresidential fixed investment increased 13.2%; structures increased at a rate of 16.7% while investment in equipment and software increased 11.8%, meanwhile, residential fixed investment increased 17.6%; however, the increase in inventories fell to $13.3 billion in the fourth quarter from $60.3 billion in the third and knocked 1.52% off of GDP all by itself…the other major drag on 4th quarter GDP was from government expenditures and investment, which decreased 14.8% in the 4th quarter, driven by a 22.1% decline in defense spending; including stagnant state & local governments, that clipped 1.41% off of the quarter’s annual rate of change…and the 2.8% quarter over quarter decline in exports clipped .40% off the GDP, while the greater 4.2% decrease in imports, which are a subtraction from GDP, added 0.73% to make the net exports contributing positive at a 0.33% annual rate…

Real House Prices

we also saw a few reports on housing, as is typical for the last week of the month….on Tuesday, S&P/Case-Shiller released their Home Price Indices for January (pdf), which showed a 7.3% year over year increase in prices of repeat home sales in the 10 city index, and an 8.1% one year jump for the 20 city index,  the greatest year over year price increase since just before the housing bubble burst in June 2006;…for the first time since March 2006, all 20 cities showed a year over year price increase, with 8 cities showing double digit price gains, led by Phoenix’s 23.2% price spike, San Francisco 17.5% increase; the 15.3% jump in Las Vegas, Detroit’s 13.8% gain, & Atlanta 13.4% increase in prices…annual price gains of this magnitude strongly suggest that the Fed’s policy has been successful in reinflating the housing bubble, which is a back-door bail out of the banks who are encumbered by large inventories of REO (real estate owned) and mortgage inventory which has never been marked to market value…but as we saw earlier, the CPI adjusted wages of 90% of us are no better than they were 45 years ago, and without a government prop, housing prices cannot rise any faster nationally than the ability of homeowners to make payments for them…as you may recall, this home price index is really a 3 month average of November, December and January, normally months where you’d see prices slipping, but even so the month over month price change was a gain of 0.1% for the 20 cities, which works out to a full 1.0% seasonally adjusted monthly gain; the greatest unadjusted monthly price increases were seen in LasVegas at 1.6%, Phoenix with 1.1%, and Tampa and Los Angeles at 0.9%the wall street journal has an interactive table of the 20 Case-shiller cities (no paywall) showing the current price index for each, the monthly change, and the annual change; all Case Shiller price indexes are set with January 2000 = 100.0, so home prices only in Detroit at 80.0 and Atlanta at 96.9 are below the levels of when the index was started…although the indices have rebounded smartly from their all time lows in January last year, the 10 city price index is still off 29.3% from the bubble highs, and the Composite 20 index is still down 28.4% from the peak…currently, both the 10 and 20 city indexes have recovered to the home price levels of late 2003, but these price indexes are not adjusted for inflation; Bill McBride does the calculation and adjusts the prices in Case-Shiller 20 city and national index, and the CoreLogic HPI, using CPI less shelter; he finds the inflation adjusted Composite 20 index prices are at December 2000 levels, which is shown in red on his chart to the right, the Case-Shiller national index, shown in yellow, is at October 1999 levels, and the CoreLogic national index, shown in blue and which omits distressed sales, is at the price level first seen in February 2001…the map below is from the New York Fed, and it shows the annual price change for January registered by the national CoreLogic home price index for the populated counties they track; the scale is below; early this month, CoreLogic reported a 9.7% year over year increase in their HPI, the largest jump since 2006…if you click on that map, you’ll be linked to the NY Fed site where there are links to similar interactive maps created from CoreLogic home price data going back to 2005…

the other widely covered housing report was on New Home Sales for February from the Census Bureau (pdf); Bill McBride has his coverage here and here; we have just a few notes: first, as census reported, sales of new single-family homes were at a seasonally adjusted annual rate of 411,000; the estimated number of homes sold in February was 33,000, 11,000 of which were not yet started, and another 11,000 of which were still under construction; census further says the annual sales rate given is 4.6 percent (±20.4%)* below the revised January rate of 431,000; that 20.4% margin of error means that census is 90% confident that the actual number of homes sold in February was between 26,268 and 39,732, so we’re uncomfortable reporting this data as factually reliable…and census also noted that the median sales price of new houses sold in February was $246,800; while the average sales price was $313,700; so it’s not like that many of those of us with the median annual incomes noted above are buying these new homes…

(the above is my weekly commentary that accompanied my sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion, and also includes other links of interest…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)