U.S. PCE Price Index Remains Firm in September; Personal Spending Improves & Income Gain Steadies

The PCE chain price index rose 0.4% during September following a like increase in August. The 3.4% y/y gain has been steady since July though below the June 2022 peak of 7.1%. The increase in the price index excluding food & energy accelerated in recent months. Last month’s 0.3% rise (3.7% y/y) was the strongest in four months after having eased to 0.1% in August. Durable goods prices eased 0.1% (-2.3% y/y) as motor vehicle & furniture & appliance prices fell. Despite a 2.3% rise (2.1% y/y) in energy costs, nondurable goods prices rose a lessened 0.3% (2.7% y/y) due to a 0.6% decline (+2.4% y/y) in apparel prices. Services prices were firm last month. The 0.5% rise (4.7% y/y) was the strongest since January. Strength spread across spending categories, but was notable on a monthly basis in the transportation sector as well food services & accommodations. Health care prices rose just 0.2% (2.3% y/y) following no change in August, The PCE services price index excluding energy & health care increased 0.5% (5.9% y/y) after a 0.2% rise.

Personal consumption expenditures (PCE) increased 0.7% during September (5.9% y/y) following an unrevised 0.4% August advance. A 0.5% rise had been expected in the Action Economics Forecast Survey. Adjusted for price changes, real PCE rose 0.4% after edging 0.1% higher in August.

Real spending on durable goods surged 1.1% (5.5% y/y) last month following little change in August. Spending on motor vehicle & parts rose 2.8% (7.2% y/y) after a 0.6% decline. Real spending on furniture & appliances rose 0.7% (2.4% y/y) after falling 0.3% in August. Real spending on recreational goods & vehicles weakened 0.4% last month (+7.7% y/y) after a 0.6% rise.

Real spending on nondurable goods rose 0.2% last month (0.8% y/y) after a 0.1% August dip. Real apparel spending increased 0.5% (-0.5% y/y) after a 0.1% easing in the prior month. Outlays on gasoline & other energy products fell 3.1% (-2.5% y/y) last month when adjusted for price changes following a 0.5% decline while real food & beverage outlays edged 0.1% higher (-0.5% y/y) following a 0.2% August decline.

Real spending on consumer services improved 0.3% (2.4% y/y) in September after a 0.1% uptick. Real transportation services outlays strengthened 1.4% (0.3% y/y) after rising 0.8% in August while real housing & utilities expenditures edged 0.1% higher (1.4% y/y) after a 0.1% rise. Recreation services buying declined 0.7% (+3.0% y/y) after a 0.2% rise but real hotel & restaurant spending rose 0.4% (1.9% y/y) following a 0.1% improvement. Real healthcare spending gained 0.4% (5.5% y/y) last month after a 0.3% rise. Financial services & insurance expenditures fell 0.7% (2.8% y/y) after a 0.3% August shortfall.

Personal income rose 0.3% (4.7% y/y) after increasing an unrevised 0.4% in August. A 0.4% rise had been expected. The gain reflected a 0.4% increase (5.3% y/y) in wages & salaries which followed a 0.5% increase in August. Proprietors' income rose 0.4% (2.2% y/y) last month following a 0.6% increase. Rental income strengthened 0.7% (9.7% y/y) after a 0.8% rise. Receipts on assets rose 0.5% (5.1% y/y), the same as in August while interest income rose 1.0% (9.0% y/y) for the third consecutive month. Dividend income improved 0.1% (1.6% y/y), the same as in August. Personal transfer receipts eased 0.1% (+2.8% y/y), down for the fifth month in the last six.

Disposable income rose 0.3% (7.1% y/y) in September, the same as in August. Taxes rose 0.8% (-9.4% y/y) after a 1.5% rise. Disposable earnings adjusted for higher prices eased 0.1% (+3.5% y/y) last month, off for the fourth straight month.

The personal saving rate fell to 3.4% in September from 4.0% in August. It equaled the lowest rate since December 2022. The level of personal savings fell 14.8% (+19.4% y/y) last month.

The personal income and consumption figures are available in Haver's USECON database with detail in the USNA database. The Action Economics forecasts are in AS1REPNA.