Treasury receipts still falling at a 13% annual rate

As of August 4, 2009, the Daily Treasury Statement (DTS) shows that the 1-month cumulative sum of income tax receipts (withheld plus paid taxes) is dropping at a 13% annual pace. The severely weak labor market is cutting wages, which in turn, drags consumer spending.

Remember, though, that the reduced tax withholding also serves as an automatic stabilizer to workers - falling tax payments mitigates the recession's effect on disposable income and spending.

This is the most up-to-date macroeconomic information out there, as most of the reports are 1-2 months old at the time of release. And the implication of this DTS is: that personal income and spending, which just released this week for June (see Econompic's take on the BEA's report), are likely to be weak into July.

Rebecca Wilder