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Economy in Brief

U.S. Personal Income and Spending Heat Up; Core Pricing Cools
by Tom Moeller  November 29, 2018

Individuals seized the opportunity presented by improved earnings and easier pricing power to ramp up spending. Personal income rose 0.5% during October (4.3% y/y) following an unrevised 0.2% September gain. A 0.4% increase was expected in the Action Economics Forecast Survey. Leading last month's strength was a 1.6% jump (5.3% y/y) in proprietors' income as it rebounded from a 0.8% drop during September. Wages & salaries rose a steady 0.3% (4.4% y/y), slower than gains during the summer. Income from assets improved 0.4% (4.3 y/y) after a 0.1% uptick. It reflected a 0.5% dividend increase (3.8% y/y) and a 0.3% gain (4.6% y/y) in interest income. Rental income increased 0.4% (4.5% y/y) after stronger increases in the prior three months. Transfer payments rose 0.6% (4.4% y/y) reflecting a 1.0% strengthening (5.2% y/y) of social security payments, the largest increase since March. Medicare receipts rose 0.9% (6.8% y/y) and Medicaid income increased 0.6% (4.8% y/y). These strong gains were offset by a 2.4% decline (+11.9% y/y) in veterans benefits and a 2.1% drop (-16.4% y/y) in unemployment insurance benefits.

Personal consumption expenditures strengthened 0.6% last month (5.0% y/y) after a 0.2% September rise, revised down from 0.4%. It was the largest increase since March. A 0.4% rise had been expected. A 0.7% increase (5.2% y/y) in services outlays led the rise, the strongest increase since April 2016. Spending on housing & utilities rose 1.0% (4.9% y/y) as did financial services & insurance payments (5.4% y/y). Recreation services spending increased 0.5% (4.5% y/y) while spending at restaurants gained 0.3% (6.1% y/y). Health care outlays rose 0.3% (4.2% y/y), the weakest increase since February. Outlays on nondurable goods increased 0.6% (5.4% y/y) as fuel outlays rose 1.9% (15.1% y/y) with higher prices. Clothing spending gained 0.5% (4.6% y/y) and spending at restaurants rose 0.1% (3.5% y/y). Durable goods outlays increased 0.5% (2.7% y/y) led by a 0.7% rise (-1.8% y/y) in motor vehicle spending. Recreational goods & vehicle spending rose 0.5% (5.6% y/y) and home furnishings & appliance outlays gained 0.2% (4.9% y/y).

The personal savings rate eased to 6.2%, the lowest level since December. It has been falling steadily since the February high of 7.4%. The level of personal savings fell 1.0% y/y.

The personal consumption chain price index rose 0.2% (2.0% y/y) after four straight monthly increases. The index excluding food & energy rose 0.1%. The 1.8% y/y increase was the weakest since February and below the 2.0% rise three months earlier. The durable goods price index rose 0.1% (-1.4% y/y) following two months of decline. Recreational goods & vehicle prices fell 0.4% (-4.4% y/y) and "other" durable goods prices declined 1.0% (-3.4% y/y). Motor vehicle prices rose 0.6% both m/m and y/y and reversed September's decline. The nondurable goods price index gained 0.3% (2.0% y/y). Clothing prices eased 0.2% (-0.4% y/y) for the fourth month in the last five and food & beverage costs slipped 0.2% (+0.3% y/y). These declines were offset by a 2.9% jump (16.3% y/y) in gasoline & other energy product costs. Services prices rose 0.2% (2.5% y/y) led by a 0.4% gain (3.1% y/y) in housing & utility costs. Health care prices eased 0.1% (+1.4% y/y) and food service & accommodations prices fell 0.2% (+1.8% y/y).

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

The minutes to the latest FOMC meeting can be found here.

Personal Income & Outlays (%) Oct Sep Aug Oct Y/Y 2017 2016 2015
Personal Income 0.5 0.2 0.4 4.3 4.4 2.6 4.9
  Wages & Salaries 0.3 0.3 0.5 4.4 4.6 2.9 5.1
Disposable Personal Income 0.5 0.2 0.4 4.8 4.4 2.8 4.4
Personal Consumption Expenditures 0.6 0.2 0.4 5.0 4.3 3.8 4.0
Personal Saving Rate 6.2 6.3 6.3 6.5
(Oct.'17)
6.7 6.7 7.6
PCE Chain Price Index 0.2 0.1 0.1 2.0 1.8 1.1 0.3
  Less Food & Energy 0.1 0.2 0.0 1.8 1.6 1.7 1.3
Real Disposable Income 0.3 0.1 0.3 2.8 2.6 1.7 4.1
Real Personal Consumption Expenditures 0.4 0.1 0.3 2.9 2.5 2.7 3.7
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