U.S. Personal Income and Spending Heat Up; Core Pricing Cools

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.

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