The headline data this month showed some growth in consumer income and spending – with expenditures far outpacing income growth. – all at the expense of the savings rate.
Analyst Opinion of Personal Income and Expenditures
The savings rate worsened – and historically is extremely low.
Consumer spending is far outpacing income – not good news.
The backward revisions this month were slight.
The market looks at current values (not real inflation adjusted) and was expecting (from Bloomberg):.
|Personal Income – M/M change
||0.0 % to 0.5 %
|Consumer Spending – M/M change
||0.6 % to 1.1 %
||+ 1.0 %
|PCE Price Index — M/M change
||0.3 % to 0.4 %
||+ 0.4 %
|Core PCE price index – M/M change
||0.1 % to 0.3 %
||+ 0.1 %
|PCE Price Index — Y/Y change
||+ 1.6 %
The monthly fluctuations are confusing. Looking at the inflation adjusted 3 month trend rate of growth, disposable income growth rate trend is unchanged while consumption’s growth rate is accelerating.
Real Disposable Personal Income is up 1.2 % year-over-year (published 1.2 % last month and not revised), and real consumption expenditures is up 2.7 % year-over-year (published 2.5 % last month and not revised)
The 3Q2017 GDP estimate indicated the economy was expanding at 3.0 % (quarter-over-quarter compounded). Expenditures are counted in GDP, and income is ignored as GDP measures the spending side of the economy. However, over periods of time – consumer income and expenditure grow at the same rate.
The savings rate continues to be low historically, and declined to 3.1 % this month [last month it was published the savings rate was 3.6% – and it was not revised].
|Core PCE price index – Yr/Yr change
||1.3 % to 1.5 %
||+ 1.3 %