![](\"https:\/\/blogger.googleusercontent.com\/img\/b\/R29vZ2xl\/AVvXsEj_hlipClhG_zIOtx1Mp8BO_fo83b8yDKEJM4TsKVnmz-IdkG4HRkj9TU4tRWcfmRgHWR5K2ef-lBqSHMMggpQZFe7KK35IRcelmsn--VhP8HXCv7xqQdIukWMHrW1GDX6Znh9fyTlgJvviEd1eXybnv57vGUgRmtLw9mdtzwvDEgyILjDCTik\/s2324\/gas-inflation.png\")
<\/a><\/div>\nToday\u2019s release of the Personal Income and Outlays Report<\/a> showed that personal income increased by $89.3 billion in April (rising 0.4% from March) while disposable personal income increased $48.3 billion (rising 0.3%) and personal consumption expenditures increased $152.3 billion (rising 0.9%) over the same period.<\/p>\n Clearly, consumers are increasing spending particularly as the COVID-19 pandemic become more of a distant event and the process of post-pandemic normalization continues but today\u2019s report also indicated that durable goods (appliances, furniture, autos) consumption expenditures increased by 2.4% on the month while nondurable goods (food, fuel , clothing, soap etc.) consumption expenditures actually declined by 0.1% over the same period.<\/p>\n The gasoline and other energy nondurable goods consumption expenditures sub-component increased at a whopping 8.6% on the month while the food nondurable goods consumption expenditures remained largely flat at 0.04%.<\/p>\n So, it appears that consumers are spending significantly more on energy (an obvious fact for anyone filling up at a gas station recently), which is impacting spending on both food and other nondurable goods, a classic stagflationary pricing dynamic.<\/p>\n Historically, increasing energy costs is nearly synonymous with general inflation (a fundamental driver) and very clearly influences the PCE-deflator index (price index baked off of personal consumption expenditures data as opposed to the traditional consumer price index CPI), one of the Feds preferred measures of inflation.\u00a0<\/p>\n The following data visualization (click for dynamic version<\/a>) shows The U.S. Energy Information Administration\u2019s price index<\/a> for all formulations of gasoline reflecting the weighted average price of gasoline as of this Monday (in blue) on the left axis and the year-over-year percent change (in red) of the Personal Consumption Expenditures deflator index on the right axis.<\/p>\n Notice that the general relationship indicates high correlation between the average price of gasoline and the annual rate of change in the PCE-deflator as well as the fact that (the more timely) gasoline prices appear to be indicating that there is more inflation to come.<\/p>\n