U.S. Consumers Dip Into Savings to Sustain Personal Spending

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.