U.S. Personal Income & Spending Firm While Savings Improves

Personal income may be finally on the mend. Overall income recovered 0.5% last month after a September dip and a 0.5% August gain, both of which were slightly higher than reported last month. A 0.4% gain last month had been expected. The catalysts for the October income gain was an improved 0.6% increase in wages & salaries (3.4% y/y), a 0.9% rise (5.7% y/y) in proprietors income and a 1.0% jump (-1.0% y/y) in interest income. These gains offset a 0.6% decline in dividend income though it remained up a firm 6.1% from last year. Also to the downside was a 4.1% drop (-5.9% y/y) in unemployment insurance benefits (-18.8% y/y). The latest drop is part of the downdraft  following the extension of jobless insurance payouts during August. These pieces added up to a 0.4% increase in disposable income which, when adjusted for prices, rose 0.3%. The y/y gain of 2.5% in real disposable income was the strongest since 2008 when a tax cut stimulated a jump.

Personal consumption expenditures rose 0.4% last month after an upwardly revised 0.3% September gain. A 0.5% October increase had been expected. Spending on goods jumped 1.1% (5.7% y/y) due to a 3.6% surge (7.5% y/y) in spending on gasoline thanks to higher prices. Spending on motor vehicles also jumped 4.5% (14.3% y/y). Elsewhere, spending on goods generally firmed as well. Spending on services inched up 0.1% (2.6% y/y) for the second consecutive month.

The personal savings rate rose to 5.7% from an upwardly revised 5.6% in September. The savings rate remained down from the 5.9% level for all of last year though it remained up from the monthly low of 1.8% late in 2007.

Price inflation remained modest. The PCE chain price index rose 0.2% after September's 0.1% uptick. The core PCE price deflator was unchanged for the second consecutive month. The declines resulted from lower monthly prices for autos (+2.8% y/y), furniture (-4.0% y/y) and apparel (-1.5% y/y). Twelve month growth of 1.3% in prices overall was the weakest since the early1960s.

The personal income & consumption figures are available in Haver's USECON and USNA databases.

Personal Income & Outlays (%)	October	September	August	Y/Y	2009	2008	2007
Personal Income	0.5	-0.0	0.5	4.1	-1.7	4.0	5.7
Wages & Salaries	0.6	0.1	0.3	3.4	-4.3	2.1	5.8
Disposable Personal Income	0.4	-0.1	0.5	3.8	0.7	5.1	5.1
Personal Consumption Expenditures	0.4	0.3	0.5	3.6	-1.0	3.0	5.2
Saving Rate	5.7	5.6	5.9	5.3 (Oct.'09)	5.9	4.1	2.1
PCE Chain Price Index	0.2	0.1	0.2	1.3	0.2	3.3	2.7
Less Food & Energy	0.0	0.0	0.1	0.9	1.5	2.3	2.4

 

Consumer Sentiment Improves Beyond Expectations
by Tom Moeller   November 24, 2010

The dour mood adopted by the consumer this summer seems to be brightening. For November, the full-month consumer sentiment reading of 71.6 was a marked improvement from mid-month. The University of Michigan Index of Consumer Sentiment indicated that the latest figure was the highest since June and it handily beat Consensus expectations for 69.5. During the last ten years there has been a 60% correlation between the level of sentiment and the three-month growth in real consumer spending.

Like mid-month, the full-month current conditions figure provided most of the lift to the November total with a rise to 82.1 from 76.6. Perceived buying conditions for large household goods improved the most followed by the assessment of current personal finances. The consumer expectations index rose to 64.8, its highest since June. Feelings about business conditions during the next twelve months as well as the next five years rose from October but not enough to recover declines since the spring. The expected change in personal finances slipped m/m though less than at mid-month.

Expected price inflation during the next year jumped to 3.7%, its highest level since May. Respondents' view of government policy, which may eventually influence economic expectations, ticked up m/m to a reading of 69; still near its lowest since January 2009. Thirteen percent of respondents thought that a good job was being done by government while 44% thought a poor job was being done, near the most since January 2009.

The Reuters/University of Michigan survey data are not seasonally adjusted. The readings are based on telephone interviews with just over 300 households during early-to-mid November. The summary indexes are in Haver's USECON database with details in the proprietary UMSCA database.

University of Michigan	November	Mid-Nov.	Oct.	Sept.	Nov. Y/Y %	2009	2008	2007
Consumer Sentiment	71.6	69.3	67.7	68.2	6.2	66.3	63.8	85.6
Current Economic Conditions	82.1	79.7	76.6	79.6	19.3	69.6	73.7	101.2
Expectations	64.8	62.7	61.9	60.9	-2.6	64.1	57.3	75.6

 

.U.S. New Home Sales Fall But Home Prices Collapse
by Tom Moeller   November 24, 2010

Weakness in the housing market was reinforced with this month's readings. Yesterday, the figures on sales of existing single-family homes slipped. Today's reading indicated that sales of new homes collapsed. The 8.1% decline to 282,000 nearly reversed all of September's gain from the series' low. Sales in the Western region of the country were the weakest. They fell 23.9% from September and were down nearly one-half from last year. Sales in the Midwest also fell 20.4% (-27.8% y/y) while sales in the Northeast were up merely 12.1% (-12.1% y/y). Only sales in the South showed any strength with a 3.1% increase but they still were off roughly one-quarter from last year. 

Emphasizing the message of weakness was the 13.9% m/m collapse in the median price of a new home to $194,900. The latest was the lowest since late-2003 (no typo). The lesser 8.0% decline in the average sales price of a new home indicates that sale prices of expensive homes held up (or they just stayed on the market). Nevertheless, the price of $248,200 also was the lowest since late-2003.

At the current sales rate, the months' supply of unsold homes rose back to 8.6; however, the latest remained well below the early-2009 high of 12.1 months. The inventory of unsold homes was down 16.5% from 12 months ago. It was off roughly two-thirds from the 2006 peak and stood at its lowest since 1968. The data in this report are available in Haver's USECON database.

US New Homes	October	September	August	Y/Y %	2009	2008	2007
Total Sales (SAAR, 000s)	283	308	275	-28.5	372	481	769
Northeast	29	33	28	-12.1	32	35	64
Midwest	39	49	32	-27.8	54	69	118
South	164	159	150	-23.0	201	264	409
West	51	67	65	-46.9	87	113	178
Median Price (NSA, $)	194,900	226,300	223,200	-9.4	214,500	230,408	243,742