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Economy in Brief

U.S. Personal Spending Growth Slows as Income Declines in September
by Tom Moeller  October 29, 2021

• Goods spending slowdown is broad-based.

• Personal income dragged lower by fewer government payments.

• Inflation remains moderate.

Personal consumption expenditures rose 0.6% (10.9% y/y) during September after increasing 1.0% in August, revised from 0.8%. A 0.5% rise had been expected in the Action Economics Forecast Survey. Adjusted for price inflation, spending increased 0.3% (6.2% y/y) after rising 0.6% in August. The rise in real outlays came despite a 0.5% drop (+4.2% y/y) in durable goods spending, pulled lower by a 3.0% decline (-8.6% y/y) in motor vehicle purchases. Home furnishings & appliance buying fell 0.6% last month in real terms (+6.1% y/y) after a 1.8% increase while recreational goods & vehicle expenditures surged 1.5% (11.2% y/y), about the same as in August. Real nondurable goods rose 0.4% (7.0% y/y) after a 1.9% jump, reflecting a 2.0% surge (13.4% y/y) in clothing outlays. Real gasoline & oil spending rose 0.6% (6.6% y/y) while food & beverage expenditures slipped 0.1% (+4.9% y/y). Real outlays on services posted a 0.4% September gain (6.4% y/y), the same as in August. Constant dollar transportation service outlays strengthened 1.7% in September (24.2% y/y), the seventh straight month of strong increase. Real recreation services outlays rose 1.4% (18.9% y/y) after falling 1.1% in August while spending at hotels and restaurants surged 1.0% (21.5% y/y). Health care outlays rose 0.4% (5.0% y/y) but housing & utilities spending fell 0.3% (+1.0% y/y) in September.

The PCE chain price index in September rose 0.3% (4.4% y/y) for the second straight month. The price index excluding food and energy edged 0.2% higher (3.6% y/y) in September, weakest increase since February. Durable goods prices rose 0.3% (7.3% y/y) after a 0.9% gain as prices for home furnishings & appliances jumped 1.3% (6.2% y/y) for the second straight month. Recreational goods & vehicles prices declined 1.0% (3.2% y/y) while motor vehicle prices improved 1.2% (14.1% y/y). Nondurable goods prices gained 0.6% (5.4% y/y) reflecting a 1.4% rise in gasoline prices (41.1% y/y). Apparel prices fell 1.2% (2.8% y/y). The services price index rose 0.2% (3.5% y/y) for the second straight month. Energy prices overall jumped 1.3% (24.9% y/y), the fourth straight month of strong increase. Food & beverage prices rose 1.1% (4.1% y/y), the largest gain in just over a year.

Personal income declined 1.0% in September (4.2% y/y) following a 0.2% increase. Stability in income m/m had been expected. Transfer receipts declined 7.0% (-4.1% y/y) with the end of Pandemic Emergency Unemployment Compensation benefits. Wages & salaries rose 0.8% (9.3% y/y), after rising 0.4%. Rental income rose 1.3% (2.4% y/y) in September for the second straight month. Earnings on assets improved 0.2% (3.8% y/y) as dividend income improved 0.4% (5.1% y/y) and interest income rose slightly (2.7% y/y). Proprietors earnings declined 0.7% (-1.0% y/y) for the second straight month. Disposable personal income declined 1.3% (+2.3% y/y) in September after a 0.1% uptick in August. Adjusted for price inflation, disposable income declined 1.6% (-2.0% y/y) after falling 0.2% in August.

The personal savings rate fell to 7.5% in September from 9.2% in August. The level of personal savings fell 19.8% last month and has fallen by nearly one-half during the last twelve months.

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.

Personal Income & Outlays (%) Sep Aug Jul Sep Y/Y 2020 2019 2018
Personal Income -1.0 0.2 1.1 4.2 6.5 4.1 5.1
  Wages & Salaries 0.8 0.4 1.0 9.3 1.3 4.8 5.0
Disposable Personal Income -1.3 0.1 1.1 2.3 7.5 3.8 5.6
Personal Consumption Expenditures 0.6 1.0 0.1 10.9 -2.6 3.7 5.1
Personal Saving Rate 7.5 9.2 9.9 14.3 (Sep '20) 16.6 7.6 7.6
PCE Chain Price Index 0.3 0.3 0.4 4.4 1.2 1.5 2.1
  Less Food & Energy 0.2 0.3 0.3 3.6 1.4 1.7 2.0
Real Disposable Income -1.6 -0.2 0.6 -2.0 6.2 2.3 3.4
Real Personal Consumption Expenditures 0.3 0.6 -0.3 6.2 -3.8 2.2 2.9
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