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Economy in Brief

U.S. Consumers Dip Into Savings to Sustain Personal Spending
by Tom Moeller  December 23, 2013

More confident individuals are dipping into savings to spend. The personal savings rate fell to 4.2% in November from a downwardly revised 4.5% in October. It was the lowest saving rate in nine months. The total amount of personal saving was down by more than one-quarter year-to-year after it spiked late in 2012.

Personal consumption expenditures rose an expected 0.5% (3.5% y/y) last month, the strongest increase since June. Motor vehicle purchases jumped 4.4% (4.4% y/y) while spending on furnishings and household equipment posted a 1.0% gain (6.5% y/y). Clothing purchases were unchanged (2.3% y/y) while lower pump prices helped gasoline expenditures fall 3.1% (-0.6% y/y). Services outlays improved 0.6% (3.4% y/y) led by a 1.3% rise (3.9% y/y) in spending on recreation services. Restaurant sales improved another 1.0% (5.4% y/y). An absence of pricing power allowed real PCE to improve 0.5% (2.6% y/y).

Personal income gained a disappointing 0.2% (2.3% y/y) after a minimal dip in October. A 0.5% November rise had been projected in the Action Economics survey. Disposable personal income increased just 0.1% (1.5% y/y), held back by a 0.8% rise (9.0% y/y) in tax payments. Wages & salaries increased 0.4% but the 2.2% year-to-year increase was the weakest since mid-2010. Rental earnings rose 0.3% (8.8% y/y) and dividend income gained 0.7% (4.0% y/y). These increases were countered by a 0.4% decline (+8.8% y/y) in proprietors' income. Also on the weak side was an unchanged level of interest earnings (1.3% y/y) and a stable level of transfer receipts (3.5% y/y). Social security payments rose 0.8% (5.6% y/y) but unemployment insurance payments declined 2.2% (-19.1% y/y).

The PCE chain price index remained unchanged in November and increased a modest 0.9% year-on-year. Less food & energy, the chain price index rose 0.1% (1.1% y/y) for a fifth straight month. Durable goods prices fell 0.3% (-2.0% y/y), led lower by a 0.5% decline (-3.1 y/y) in home furnishings prices. Recreational goods costs were off 0.3% (-5.0% y/y) while motor vehicles prices slipped 0.1% (+0.6% y/y). Nondurable goods prices fell -0.3% (-0.6% y/y) led down by a 1.5% drop (-5.5% y/y) in gasoline prices. Prices for services gained 0.2% (1.9% y/y).

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 (%) Nov Oct Sep Y/Y 2012 2011 2010
Personal Income 0.2 -0.1 0.4 2.3 4.2 6.1 2.9
  Wages & Salaries 0.4 0.1 0.4 2.2 4.3 4.1 2.0
Disposable Personal Income 0.1 -0.2 0.5 1.5 3.9 4.8 2.8
Personal Consumption Expenditures 0.5 0.4 0.3 3.5 4.1 5.0 3.8
Personal Saving Rate 4.2 4.5 5.1 5.9
(Nov'12)
5.6 5.7 5.6
PCE Chain Price Index 0.0 -0.0 0.1 0.9 1.8 2.4 1.7
  Less Food & Energy 0.1 0.1 0.1 1.1 1.7 1.4 1.3
Real Disposable Income 0.1 -0.2 0.4 0.6 1.7 2.4 1.1
Real Personal Consumption Expenditures 0.5 0.4 0.2 2.6 2.2 2.5 2.0
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