Haver Analytics
Haver Analytics
Global| Dec 21 2007

U.S. Personal Consumption & Prices Firm, Income Light


Personal consumption expenditures surged 1.1% last month after an upwardly revised 0.4% rise. The November increase beat Consensus expectations for a 0.7% rise. Adjusted for inflation spending rose 0.5% after the upwardly revised 0.1% [...]

Personal consumption expenditures surged 1.1% last month after an upwardly revised 0.4% rise. The November increase beat Consensus expectations for a 0.7% rise. Adjusted for inflation spending rose 0.5% after the upwardly revised 0.1% uptick. Three month growth in real spending rose to 3.4% (AR).

Spending on discretionary items was firm led by a 1.8% (9.6% y/y) jump in real spending on household furniture & appliances. Spending on apparel also rose a firm 0.9% (5.6% y/y) but spending on motor vehicles fell 0.8% (+2.4% y/y). Spending on electricity surged 5.9% (6.9% y/y) but real spending on gasoline fell 0.3% (-0.6% y/y). Medical care spending rose 0.2% and spending on recreation fell 0.1%). Spending on food rose 0.7% (2.2% y/y). Real spending excluding food & energy rose 0.4% (3.2% y/y). These detailed spending figures are available in Haver's USNA database.

The PCE chain price index surged 0.6%%, lifted by higher energy prices. The core PCE price index gained a steady 0.2% but y/y growth in core prices picked up further to 2.2%. Three month growth in core prices rose to 2.9% (AR) due to faster growth in services prices where the three month growth of 4.0% was the fastest since late 2005.

Personal income during November rose 0.4% and the gain fell just short of expectations for a 0.5% rise. The October increase was unrevised at 0.2%. Three month growth in income was 4.2% (AR), its worst since June.

Lower interest rates caused a shortfall in interest income of 0.4% (+6.2% y/y) which was the same decline as in October. Conversely, growth in dividend income held steady at 0.9% (12.6% y/y), the same as during the prior two months.

Growth in wages & salaries picked back up to 0.6% (5.2% y/y) after an unchanged reading for October. Three month growth amounted to 5.3%. Factory sector wages rose 0.4% (2.2% y/y) after declining during the prior two months.Wage & salary income in the private service-producing industries rose 0.7% (6.1% y/y) after no change in October. Wages in the government sector again increased 0.4% (4.6% y/y).

Personal current taxes rose a firm 0.7% (8.1% y/y) and that left disposable personal income to rise 0.3% (5.8% y/y). Adjusted for inflation disposable personal income fell 0.3% (+2.1% y/y) for the second month of decline. That left the three month growth in real DPI negative at -0.9%, its worst since June.

Disposition of Personal Income November October Y/Y 2006 2005 2004
Personal Income 0.4% 0.3% 6.1% 6.6% 5.9% 6.2%
Personal Consumption 1.1% 0.4% 6.7% 5.9% 6.2% 6.4%
Saving Rate -0.5% 0.3% 0.5% (Nov. 06) 0.4% 0.5% 2.1%
PCE Chain Price Index 0.6% 0.3% 3.6% 2.8% 2.9% 2.6%
  Less food & energy 0.2% 0.2% 2.2% 2.2% 2.2% 2.1%
Michigan Consumer Sentiment Down in December
by Tom Moeller December 21, 2007

The University of Michigan's consumer sentiment index for all of this month fall 0.9% to 75.5.That was somewhat better than the reading at mid-month and it beat expectations for a December reading of 74.9. Nevertheless it left sentiment down 17.7% y/y.

Somewhat improved expectations caused the better December result. Expected business conditions during the next year fell only 6.8% (-35.2% y/y), an improvement from the -11.0% preliminary reading. Expectations for business conditions during the next five years also improved 6.6% (-16.5% y/y) from the November level and versus the initial read of a m/m decline. Down still is the result versus 3Q. Expectations for personal finances fell further by 2.6% (-9.7% y/y).

The current conditions index in fact was revised lower from the mid-month reading and fell 0.5% after a hefty 6.3% November decline. Current buying conditions for large household goods improved modestly m/m but remained down 13.0% from last December. The view of current personal finances, however, slid 3.0% for the second sharp monthly decline (-17.6% y/y).

The rise in gasoline prices raised expectations for inflation during the next twelve months to 4.4% (slightly lower than the mid-month read) from 4.3% in November and from 3.5% one year ago. For the next five to ten years expectations were for a 3.6% rise in prices.

Opinions about government policy dropped 9.8% m/m which brought this opinion measure down 16.9% from one year ago.

The University of Michigan survey is not seasonally adjusted.The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver's USECON database, with details in the proprietary UMSCA database.

Consumer sentiment, the economy, and the news media is a 2004 paper from the Federal Reserve Bank of San Francisco and it can be found here.

University of Michigan Dec (Final) Dec (Prelim) Nov Dec  y/y 2006 2005 2004
Consumer Sentiment 75.5 74.5 76.1 -17.7% 87.3 88.5 95.2
   Current Conditions 91.0 92.1 91.5 -15.8% 105.1 105.9 105.6
   Expectations 65.6 63.2 66.2 -19.2% 75.9 77.4 88.5
UK Consumer Confidence Continuesto Plunge
by Robert Brusca December 21, 2007

The GFK consumer sentiment report for the UK continues to plunge and it is one of the clearest signs of trouble in the UK economy. The CBI survey on retailing earlier had signaled some weakness and expectations of a softer January to boot. But actual sales data (released today) showed a gain in November although food accounted for all the volume increase. While the Bank of England struggles with policy, consumers seem to have made up their minds about where the balance of risk lies.

At a reading of -14 the GFK index is at its weakest point in over 10 Years. Still, households rate their financial situation as the best in 10 years currently. In this environment their plans for making major purchases are the lowest they have been in 10 Years. Consumers rate the general economic situation in the past 12-months as the worst in the past two years and in the bottom four percent over ten years. They assess inflation as the worst in 10 years.

While BOE is concerned about inflation too, a recent wage survey finds that wages deals have been contained in their recent range and in fact are not accelerating. Of course while that may be good news to the BOE, it is another factor pressuring consumers as energy prices rise.

The outlook for the next 12-months score very weak readings for the household financial situation and the general economic situation both in the bottom 15 percentile of their respective ranges for two years and about the bottom quarter of the range over 10-years. The major purchases index is at the 50% mark for the next 12 months compared to the past two years’ range, but that is a bottom 25% reading over the past 10 years. Obviously the consumer sector has been weak and is weakening again. Stratified by income, both high and low income respondents see conditions as among their poorest in 10 years.

GFK Consumer Survey
          % of 2Yr % of 10Yr
  Dec-07 Nov-07 Oct-07 Sep-07 Range Range
Consumer Confidence -14 -10 -8 -7 0.0% 0.0%
Household Financial Situation 25 25 25 25 100.0% 100.0%
Major Purchases -14 -7 -5 -3 0.0% 0.0%
Last 12 Months
Household Financial Situation -1 0 2 4 37.5% 40.0%
General Economic Situation -36 -32 -30 -29 0.0% 4.2%
CPI 74 73 69 64 100.0% 100.0%
Savings 33 35 38 38 52.6% 84.5%
Next 12-Months
Household Financial Situation 8 9 13 12 14.3% 14.3%
General Economic Situation -26 -21 -17 -19 0.0% 26.7%
Unemployment 30 31 29 27 35.7% 62.5%
Major Purchases -19 -20 -18 -20 50.0% 25.0%
Savings 19 20 19 17 63.6% 85.2%
By Income
Lower -19 -16 -14 -13 0.0% 0.0%
Upper -7 -6 -3 -1 0.0% 0.0%
Service Sector Hits the Skids in France
by Robert Brusca December 21, 2007

The service sector is beginning to ease in France. The index is down form its peak if 113 in October. As a percent of its range the December reading is still in the top 17% of its range. The outlook reading at +3 stands in the 80.6 percentile of its range and is still in the top 20% of that range. Expected sales for the 3-months ahead are in the 67th percentile of their range, the top third, roughly. Employment expectations are still firm in their range. Over the past three months observed employment is nearly in the top quarter of its range whereas expected employment in the three months ahead slips to the top third at a reading of 10 which is in the 68th percentile of its range.

These readings generally show that the outlook is a bit weaker than the current or recent past readings have been. And while the slowdown and drop off is clear on the chart it is also true that the survey levels are still firm; what we must wait and see is how far this expected softening may go.

Insee released today a separate survey on industry in which morale fared much better than for services. It is surprising with the concerns over the strong euro that it is the service sector where morale is fading faster. This could have something to do with the financial turmoil that has been in train, of course. But industry is holding up much better despite its competitiveness pressures. Even in that survey, however, there are more concerns among executives about the outlook for production in their own business sector. French consumer spending on MFG goods in also November worked its way lower showing an unexpected drop. This spending results may have been affected by recent transits strikes.

There is evidence of strain in the French economy. All of these reports will bear watching as we turn the calendar sheet to a new month and new a new year. We will come upon this new year with the economy a bit more challenged than usual in France, across the Euro Area, in the US and elsewhere.

France INSEE Services Survey Jan 2000-date
  Dec-07 Nov-07 Oct-07 Sep-07 %tile Rank Max Min Range Mean
Climate Indicator 108 111 113 112 83.3 18 113 83 30 102
Climate: 3-Mo Moving avg 111 112 113 113 92.8 5 113 85 28 102
Climate: 12-Mo Moving avg 110 110 110 110 99.6 2 110 91 20 101
Outlook 3 5 7 8 80.6 23 9 -22 31 -1
Observed 3-mos 14 17 18 18 83.3 7 19 -11 30 6
Expected 3-mos 9 13 14 14 67.9 38 18 -10 28 7
Sales Price
Observed over 3-Mos 0 -2 1 2 33.3 33 8 -4 12 0
Expected over 3-Mos -2 2 -1 1 30.0 69 5 -5 10 1
Observed over 3-Mos 14 8 3 8 73.5 5 23 -11 34 5
Expected over 3-Mos 10 11 17 9 68.2 13 17 -5 22 5
  • Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio.   Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984.   He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C.   In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists.   Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.

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