U.S. Personal Income Declines While Spending Growth Moderates During October

• Decline in income reflects fewer government transfer payments.

• Spending strength reflects higher services outlays.

• Prices remain steady.

Personal income declined 0.7% during October (+5.5% y/y) following a 0.7% September rise, revised from 0.9%. A 0.1% dip had been expected in the Action Economics Forecast Survey. Government payments for unemployment compensation fell sharply for the fourth straight month, off 14.1%. (The Federal government unemployment compensation add-on in the CARES Act expired in August and has not been renewed). Employee wages & salaries rose 0.7% (2.1% y/y) after rising 0.9% in September as employment increased. Proprietors' income jumped 1.2% (14.5% y/y) and rental income rose 0.5% (3.3% y/y). Income from assets improved 0.7% (-3.5% y/y) as dividend income gained 1.0% (-3.6% y/y). Disposable personal income fell 0.8% (+6.2% y/y) last month and reversed September's 0.7% increase. Adjusted for price inflation, real disposable income fell 0.8% (+5.0% y/y) after rising 0.6%.

Personal consumption expenditures increased 0.5% during October (-0.6% y/y) after two consecutive months of 1.2% increase. This was the smallest of six consecutive monthly increases after the sharp declines in March and April. A 0.4% rise had been expected. Adjusted for inflation, real spending increased 0.5% (-1.8% y/y) in October. The rise in spending reflected a 0.6% increase (-6.3 y/y) in services outlays. Recreation services spending strengthened 2.6% (-27.2% y/y) while foods services & hotel outlays eased 0.4% (-17.9% y/y). Health care outlays rose 0.5% (-4.0% y/y) while housing & utilities spending rose 0.3% (1.4% y/y). Real spending on goods increased 0.2% (8.5% y/y) as spending on durable goods increased 0.8% (14.7% y/y). Recreational goods & vehicles outlays surged 1.5% (25.4% y/y). Nondurable goods outlays were little changed (+5.2% y/y) as clothing spending fell 0.8% (2.2% y/y).

Last month's rise in spending relative to income lowered the personal saving rate to 13.6% from 14.6% in September, revised from 14.3%. The rate reached a record high 33.6% in April. The level of personal saving fell 7.8% (+101.4% y/y).

The PCE chain price index held steady (1.2% y/y) in October following an unrevised 0.2% September increase. The price index excluding food and energy was little changed (1.4% y/y) after an unrevised 0.2% increase in September. Energy prices increased 0.1% (-9.6% y/y), the smallest of five consecutive monthly gains. Food & beverage prices also improved 0.1% (3.8% y/y) after declining for three straight 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 2019 2018 2017 Personal Income -0.7 0.7 -2.5 5.5 3.9 5.3 4.9   Wages & Salaries 0.7 0.9 1.5 2.1 4.7 5.0 4.7 Disposable Personal Income -0.8 0.7 -2.9 6.2 3.7 5.8 4.9 Personal Consumption Expenditures 0.5 1.2 1.2 -0.6 3.9 4.9 4.5 Personal Saving Rate 13.6 14.6 15.1 7.2 (Oct. '19) 7.5 7.8 7.2 PCE Chain Price Index 0.0 0.2 0.3 1.2 1.5 2.1 1.8   Less Food & Energy -0.0 0.2 0.3 1.4 1.7 2.0 1.7 Real Disposable Income -0.8 0.6 -3.3 5.0 2.2 3.6 3.1 Real Personal Consumption Expenditures 0.5 1.1 0.9 -1.8 2.4 2.7 2.6