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Despite Bad Economic News, Stocks Rose 4% In The Week Ended July 29, 2022

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Real disposable personal income (DPI) per capita in the United States declined from $46,985 to $45,356 in the past 12 months, according to data released today by the U.S. Bureau of Labor Statistics. Consumer buying power shrunk by -3.5%.

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Here’s the breakdown of income and spending, crucial factors in the consumer driven economy of the U.S: Disposable personal income was up +3.3% compared to June 2021 – before adjusting for inflation.

Inflation, as measured by the Personal Consumption Expenditure Deflator (PCED), soared +6.8% in the same 12 months, leading to the shrinking buying power.

Personal outlays rose +8.4%, largely because of inflation, while the savings rate, at +5.1%, in the same 12-month period, fell below its pre-Covid level.

It means Americans are using an increasing amount of their monthly income and saving less to cover monthly expenses, which have risen because of inflation.

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On Thursday, the Bureau of Economic Analysis reported that the economy shrank by nine-tenths of 1% in the second quarter of 2022. The number will be revised twice before the final figure is published in a month. The decline in the second quarter followed a decline of -1.6% in the first quarter. Still, the forecast from leading economists surveyed on July 17 by The Wall Street Journal is for about +1% growth for the four quarters through the end of 3Q 2023.

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The stock market discounted the bad economic news and may already have bottomed in anticipation of the growth forecast.

The Standard & Poor’s 500 stock index closed at 4,130.29, gaining +1.42% Friday and +4.16% from last Friday’s closing price.

The benchmark for America’s 500 largest publicly investable companies closed +59.45% higher than the March 23, 2020, bear market low and down 14.92% from the January 3rd all-time high.

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