Recent Updates
- Israel: Average Housing Prices (Q2)
- Japan: NCI Economic Activity Index (Aug)
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- more updates...
Economy in Brief
U.S. Empire State Manufacturing Index Plummets in August; Lowest Since May '20
The Empire State Manufacturing Index of General Business Conditions plunged to -31.3 in August...
U.S. Import and Export Prices Fall in July; Deepest Since April 2020
Import prices fell 1.4% m/m (8.8% y/y) in July...
U.S. Housing Affordability Declines Further in June
The NAR Fixed Rate Mortgage Housing Affordability Index fell 3.6% in June...
EMU Output Makes Solid Gain in June
The European Monetary Union posted a 0.7% increase for industrial output in June...
U.S. Producer Prices Fall During July; Core Increase Weakens
The Producer Price Index for Final Demand fell 0.5% during July...
Viewpoints
Commentaries are the opinions of the author and do not reflect the views of Haver Analytics.
by Robert Brusca March 30, 2007
Consumer Spending And Income Trends | Start of Q4 | |||||
Percentage changes at annualized rates: various horizons | ||||||
Inflation-adjusted | One month | Three months | Six months | One Year | Q1/Q4 | Oct/Q3 |
Consumption | 2.1% | 3.6% | 4.2% | 3.2% | 3.9% | 3.2% |
Goods | -3.7% | 3.7% | 5.2% | 3.4% | 5.1% | 1.4% |
Durable Goods | -1.2% | 6.9% | 7.5% | 5.3% | 9.2% | 5.3% |
Nondurable Goods | -5.0% | 2.0% | 4.0% | 2.5% | 3.1% | -0.5% |
Services | 6.2% | 3.8% | 3.6% | 3.2% | 3.3% | 4.7% |
Consumer Income | ||||||
Real DPI | 1.7% | 3.4% | 4.9% | 2.6% | 4.0% | -- |
Per Capita | 1.0% | 2.6% | 3.9% | 1.6% | -- | -- |
Memo: | Feb.07 | Three-Mos | Six-Mos | One-Year | -- | -- |
Savings Rate (Pct) | -1.2 | -1.3 | -1.2 | -1.2 | -- | -- |
The headline numbers showed a 0.6% m/m rise in spending and income. The inflation-adjusted spending rose 0.2% (2.4% annualized real spending is not bad). But the core PCE deflator, up by 0.3% (actually 0.33124; this compounds to 4.048% in all its digital glory) has become a problem.
Ok, the Fed did say that inflation was the greater risk (right-o, on that one). But when it came to the policy statement the Fed went dead neutral on us saying policy would depend on incoming data. Well, here it is.
The table above shows the spending trends. And while the current month shows weakness in durables and nondurables, that was swamped by STRENGTH in services spending. Services is the stealth portion of the US Economy. Yeah 80% of us work in the sector but no one really surveys us. We are battered each month by manufacturing reports, surveys and innuendo. But the services sector lays low until the PCE report (but that only has only consumer services); services also emerge each month in the ISM Nonmanufacturing index (but that mixes them other nonmfg like mining and construction) and in the payroll report (but that is just jobs, not output).
We do see the ongoing IMPACT of services during the month in the weekly jobless claims and consumer confidence numbers but there is no way to isolate a services component. Suffice it to say that the strength we see in spending is a surprise. Spending strength in Q1 2007 has two sources. The first source is services as just mentioned. The second is a legacy from Q4 that back-loaded so much spending into the month of December that it has helped to boost the level of spending in Q1 compared to the Q4 AVERAGE. That comparison is the key. It is why the quarter to date Real PCE reading is probably a surprise to you with growth at 3.9%.Time to carpet the ceiling?
The chart below shows the Year/Year growth in the CPI and the PCE cores. These indexes have different methods and weights but they are both DOING THE SAME THING. Well, INFLATION is a generalized and ongoing increase in prices, so I guess if you REALLY HAVE IT, it doesnt matter which index you look at. AND I guess we really have it. |
Consumer Spending And Income Trends | Start of Q4 | |||||
---|---|---|---|---|---|---|
Percentage changes at annualized rates: various horizons | ||||||
Inflation-adjusted | One month | Three months | Six months | One Year | Q1/Q4 | Oct/Q3 |
Consumption | 2.1% | 3.6% | 4.2% | 3.2% | 3.9% | 3.2% |
Goods | -3.7% | 3.7% | 5.2% | 3.4% | 5.1% | 1.4% |
Durable Goods | -1.2% | 6.9% | 7.5% | 5.3% | 9.2% | 5.3% |
Nondurable Goods | -5.0% | 2.0% | 4.0% | 2.5% | 3.1% | -0.5% |
Services | 6.2% | 3.8% | 3.6% | 3.2% | 3.3% | 4.7% |
Consumer Income | ||||||
Real DPI | 1.7% | 3.4% | 4.9% | 2.6% | 4.0% | -- |
Per Capita | 1.0% | 2.6% | 3.9% | 1.6% | -- | -- |
Memo: | Feb.07 | Three-Mos | Six-Mos | One-Year | -- | -- |
Savings Rate (Pct) | -1.2 | -1.3 | -1.2 | -1.2 | -- | -- |