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Economy in Brief

U.S. Consumer Spending Declines as Disposable Income Growth Subsides
by Tom Moeller  October 31, 2014

Personal consumption expenditures fell 0.2% during September (+3.5% y/y) following an unrevised 0.5% August improvement. A 0.1% uptick had been expected in the Action Economics Forecast Survey. A 5.3% decline (+9.6% y/y) in motor vehicle purchases offset a 6.3% rise. Furnishings and durable household equipment spending fell 0.4% (+1.4% y/y), counterbalancing the 0.4% August rise. Apparel purchases fell 0.9% (+1.9% y/y) after a 0.6% increase but services spending added 0.2% (3.9% y/y) to the 0.5% gain. In constant dollars, spending was down 0.2% (+2.1% y/y).

Disposable personal income ticked up just 0.1% (3.9% y/y), the weakest performance since December. In constant dollars, disposable income was unchanged (2.5% y/y). Overall personal income increased 0.2% (4.1% y/y), just short of expectations for a 0.3% rise. Wages & salaries improved 0.2% (5.1% y/y) while rental income gained 0.2% (6.9% y/y). Personal transfer receipts increased 0.3% (5.6% y/y), bolstered by a 0.8% rise in Medicaid income (15.6% y/y). Earnings from dividends rose 0.5% (2.7% y/y). To the downside, interest income fell 0.4% (+0.3% y/y) for the third straight month, while proprietors income slipped 0.1% (+1.6% y/y).

The decline in spending coupled with a rise in income caused the personal saving rate to recover to 5.6%, matching the highest level since December 2012. Personal savings rebounded 4.3% (11.4% y/y) and made up a 3.6% August decline.

The chain price index nudged 0.1% higher last month (1.4% y/y) after a 0.1% dip. Energy prices fell 0.8% (-0.9% y/y) while food prices gained 0.2% (2.5% y/y). Durable goods prices dipped 0.1% (-2.3% y/y) while nondurable prices slipped marginally (+1.0% y/y). Services prices gained 0.1% (2.2% y/y). The price index excluding food & energy edged 0.1% higher (1.5% y/y) for a third straight month.

The personal income & consumption figures are available in Haver's USECON and USNA databases. The consensus expectation figure is in the AS1REPNA database.

Personal Income & Outlays (%) Sep Aug Jul Y/Y 2013 2012 2011
Personal Income 0.2 0.3 0.3 4.1 2.2 5.2 6.2
  Wages & Salaries 0.2 0.5 0.3 5.1 2.8 4.5 4.0
Disposable Personal Income 0.1 0.3 0.2 3.9 1.0 4.9 5.0
Personal Consumption Expenditures -0.2 0.5 0.0 3.5 3.6 3.7 4.8
Personal Saving Rate 5.6 5.4 5.6 5.2
(Sep '13)
4.9 7.2 6.0
PCE Chain Price Index 0.1 -0.1 0.1 1.4 1.2 1.8 2.5
  Less Food & Energy 0.1 0.1 0.1 1.5 1.3 1.8 1.5
Real Disposable Income 0.0 0.3 0.1 2.5 -0.2 3.0 2.5
Real Personal Consumption Expenditures -0.2 0.5 -0.0 2.1 2.4 1.8 2.3
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