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Economy in Brief

U.S. Personal Spending Inches Higher as Income Strengthens
by Tom Moeller  November 25, 2015

Consumers are exhibiting cautious spending behavior despite firm income gains. Personal consumption expenditures improved 0.12% (2.9% y/y) in October, the same as September's 0.08% rise which was unrevised. These were the smallest gains since January and missed expectations for a 0.3% rise in the Action Economics Forecast Survey. Adjusted for inflation, spending inched 0.06% higher (2.7% y/y). A 0.7% decline (+3.4% y/y) in real motor vehicle purchases held back the overall rise, though it followed three months of increase. Constant dollar buying of recreational goods & vehicles made up that weakness with a 0.9% rise (8.4% y/y) after a 0.8% increase. Home furnishings & appliance purchases increased 0.6% (6.2% y/y) in constant dollars following a 0.1% dip. In the nondurable goods sector, real apparel purchases surged 0.8% (4.3% y/y) after a 0.5% rise. Real gasoline purchases fell 0.3% (+2.0% y/y) after a 1.5% decline and the constant dollar value of eating out dropped 0.8% (-0.3% y/y), down for the third month in the last four. Real spending on services was unchanged (2.2% y/y) after a 0.2% increase. Real spending on recreation services rose 0.5% (0.3% y/y) after a 1.0% jump but constant dollar housing & utilities outlays fell 0.8% (+0.8% y/y). Health care spending advanced 0.4% (4.1% y/y) in real terms, the same as the prior month. 

Personal income improved 0.4% (4.6% y/y) for the third time in four months. The increase matched expectations and reflected a 0.6% gain (4.9% y/y) in wage & salary income after having been unchanged in September. Rental income jumped 0.8% (7.2% y/y), the strongest increase in four months. Proprietors earnings rose 0.3% (2.8% y/y) after a 0.4% rise. Dividend earnings jumped 0.9% (5.5% y/y), the strongest rise in three months, but interest earnings fell 0.2% (+3.4% y/y) following three straight 0.1% upticks. Transfer receipts improved 0.3% (4.9% y/y), the same in the prior month. The gain was held back by a 2.8% decline (+1.0% y/y) in unemployment insurance benefits but Medicaid income rose 0.7% (7.6% y/y). Veterans benefits also rose 0.7% (12.1% y/y) and Medicare payments improved 0.5% (4.0% y/y). 

Disposable personal income jumped 0.4% and gains have been fairly steady for the last six months. The 4.1% y/y rise matched growth during all of last year. Adjusted for price inflation, take-home pay rose 3.9% y/y, up from the 2.7% increase last year.

The personal savings rate improved to 5.6% from 5.3%, revised from 4.8%. The rate was the highest since 2012. Personal saving increased 30.7% during the last twelve months.

The chain price index improved 0.1% (0.2% y/y) following two months of slight decline. The index change was held back by a 0.2% dip (2.0% y/y) in durable goods prices but food prices improved 0.2% (0.8% y/y) for the fourth straight month. Nondurable goods prices eased slightly (-3.7% y/y) while energy prices gained 0.2% (-18.4% y/y). Services prices improved 0.1% (1.9% y/y) after two months of 0.2% rise. The price index excluding food & energy remained unchanged (1.3% y/y) after a 0.2% rise.

The personal income & consumption figures are available in Haver's USECON database with detail in the USNA database. The Action Economics figure is in the AS1REPNA database.

Global Fallout from China's Industrial Slowdown from the Federal Reserve Bank of San Francisco is available here.

Personal Income & Outlays (%) Oct Sep Aug Y/Y 2014 2013 2012
Personal Income 0.4 0.2 0.4 4.6 4.4 1.1 5.0
  Wages & Salaries 0.6 0.0 0.4 4.9 5.1 2.7 4.5
Disposable Personal Income 0.4 0.2 0.4 4.1 4.2 -0.1 5.1
Personal Consumption Expenditures 0.1 0.1 0.3 2.9 4.2 3.1 3.4
Personal Saving Rate 5.6 5.3 5.2 4.5
(Oct. '14)
4.8 4.8 7.6
PCE Chain Price Index 0.1 -0.1 -0.0 0.2 1.4 1.4 1.9
  Less Food & Energy 0.0 0.2 0.1 1.3 1.5 1.5 1.9
Real Disposable Income 0.4 0.3 0.4 3.9 2.7 -1.4 3.1
Real Personal Consumption Expenditures 0.1 0.1 0.3 2.7 2.7 1.7 1.5
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