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Economy in Brief

U.S. Personal Spending & Price Inflation Strengthen
by Tom Moeller  November 24, 2021

• Spending improvement is broad based.

• Core price inflation accelerates.

• Wage & salary growth remains strong.

Personal consumption expenditures surged 1.3% (12.0% y/y) during October following an unrevised 0.6% September gain. A 1.0% rise had been expected in the Action Economics Forecast Survey. Adjusted for price inflation, spending increased 0.7% (6.6% y/y) after rising 0.3% in September. Real spending on durable goods strengthened 2.0% (6.4% y/y) led by a 2.5% rise (11.1% y/y) in real outlays on recreational goods & vehicles. Auto spending rose 2.2% (-2.0% y/y) while furniture & appliance purchases increased 1.4% (6.2% y/y). Real nondurable goods rose 0.4% (7.8% y/y), reflecting a 1.0% surge (15.2% y/y) in clothing outlays. Real gasoline & oil spending eased 0.9% (+10.2% y/y) while food & beverage expenditures slipped 0.1% (+5.6% y/y). Real outlays on services posted a 0.5% October gain (6.3% y/y) after September's 0.2% rise. Real transportation service outlays rose 0.4% (22.9% y/y) after seven months of strong gain. Real recreation services outlays rose 0.5% (18.4% y/y) while spending at hotels and restaurants fell 0.7% (+21.4% y/y). Real health care outlays rose 0.6 % (4.2% y/y) but housing & utilities spending fell 0.1% (+0.6% y/y) in October.

The PCE chain price index rose 0.6% last month  (5.0% y/y) following three straight months of 0.4% increase. The price index excluding food and energy rose 0.4% in October raising the y/y increase to 4.1%, the strongest gain since January 1991. Durable goods prices rose 1.2% (8.8% y/y) owing to a 2.7% surge (17.1% y/y) in motor vehicle prices. The price index for home furnishings & appliances rose 0.3% last month. The 6.7% y/y rise was the strongest in roughly forty years. Recreational goods & vehicles prices jumped 1.0% (4.2% y/y). Nondurable goods prices gained 1.2% (6.8% y/y) reflecting a 6.3% rise (49.1% y/y) in gasoline prices. Apparel prices rose 0.2% (4.0% y/y). The services price index rose 0.3% (3.7% y/y) for the third straight month. Energy prices overall jumped 4.9% (30.2% y/y), the fifth straight month of strong increase. Food & beverage prices rose 0.8% (4.8% y/y).

Personal income recovered 0.5% (5.9% y/y) in October following a 1.0% September decline. A 0.2% rise had been expected. Wages & salaries rose 0.8% last month (9.8% y/y) and rental income gained 0.3% (3.2% y/y) following three straight months of strong increase. Earnings on assets improved 0.9% (4.1% y/y) as dividend income strengthened 1.2% (5.7% y/y) and interest income rose 0.6% (2.8% y/y). Proprietors earnings were fairly steady (-2.3% y/y) following two months of decline. Disposable personal income increased 0.3% (4.1% y/y) in October after a 1.3% September decline. Adjusted for price inflation, disposable income declined 0.3% (-0.9% y/y) after falling 1.6% in September.

The personal savings rate fell to 7.3% in October from 8.2% in September. It was the lowest rate since December 2019 and down from a high of 33.8% in April of last year. The level of personal savings fell 10.4% last month and has fallen 44.3% 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 (%) Oct Sep Aug Oct Y/Y 2020 2019 2018
Personal Income 0.5 -1.0 0.3 5.9 6.5 4.1 5.1
  Wages & Salaries 0.8 0.9 0.4 9.8 1.3 4.8 5.0
Disposable Personal Income 0.3 -1.3 0.3 4.1 7.5 3.8 5.6
Personal Consumption Expenditures 1.3 0.6 1.1 12.0 -2.6 3.7 5.1
Personal Saving Rate 7.3 8.2 9.9 13.6 (Oct. '20) 16.6 7.6 7.6
PCE Chain Price Index 0.6 0.4 0.4 5.0 1.2 1.5 2.1
  Less Food & Energy 0.4 0.2 0.3 4.1 1.4 1.7 2.0
Real Disposable Income -0.3 -1.6 -0.1 -0.9 6.2 2.3 3.4
Real Personal Consumption Expenditures 0.7 0.3 0.7 6.6 -3.8 2.2 2.9
 
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