U.S. Personal Income and Spending Post Solid Gains in November
by:Sandy Batten
|in:Economy in Brief
Summary
- A 0.4% m/m gain in income was led by strong wages and salaries.
- Real personal spending up more than expected but still points to a slowdown in Q4.
- Headline PCE price index fell in November for he first time since April 2020.
- Six-month core inflation rate fell below Fed’s 2% target.
Personal consumption expenditures (PCE) increased 0.2% m/m (5.4% y/y) in November following a downwardly revised 0.1% monthly gain in September (previously +0.2% m/m). A 0.2% m/m rise in October had been expected in the Action Economics Forecast Survey. Adjusted for price changes, real PCE rose 0.3% (2.7% y/y) after a downwardly revised 0.1% m/m increase in October (previously +0.2% m/m). Real PCE growth is slowing, though it remains solid. The average of PCE in October and November was 2.2% annualized from the Q3 average versus 3.1% in Q3 from Q2.
Real spending on durable goods rebounded in November, rising 0.9% m/m (+6.7% y/y) following a 0.5% m/m decline in October. Spending on motor vehicles fell further, down 0.7% m/m on top of a 0.6% monthly decline in October. The remaining three major categories each posted monthly gains of more than 1%. Real spending on nondurables rose 0.3% m/m (+2.0% y/y) following a 0.1% m/m decline in October. The rebound was led by a 1.4% monthly gain in spending on clothing and footwear. By contrast, spending on gasoline and other energy goods fell 1.7% m/m in November.
Real spending on services rose 0.2% m/m (+2.2% y/y) in November, its third consecutive 0.2% m/m increase. Spending on food services and accommodation jumped 1.3% m/m, the largest monthly gain since January, and spending on financial services rose 0.6% m/m. Spending on housing and utilities edged up 0.1% m/m. Spending on healthcare continued to slow with a 0.1% monthly gain in November versus 0.3% m/m in October and 0.5% m/m in September. Spending on transportation services fell 0.6% m/m, the first decline in four months, and spending on other services declined 0.3% m/m, the first decline in three months.
Personal income rose 0.4% m/m (+4.6% y/y) in November following an upwardly revised 0.3% m/m gain in October (previously +0.2% m/m). A 0.6% m/m (+6.5% y/y) increase in wages and salaries, the largest monthly increase since March, led the monthly gain in total income. Rental income rose 0.7% m/m, and income from assets increased 0.4% m/m. By contrast, proprietors’ income fell 0.2% m/m, the first monthly decline in seven months, and current transfer receipts declined 0.4% m/m, the sixth consecutive monthly decline, reflecting a 0.5% m/m drop in government social benefits.
Disposable income increased 0.4% m/m (+7.0% y/y) in November, its largest monthly gain since August. After adjusting for inflation, real disposable income also rose 0.4% m/m (+4.3% y/y) in November, its largest monthly gain since March. The personal saving rate edged up to 4.1% in November, reflecting a 3.0% m/m increase in personal saving, from 4.0% in October. Notwithstanding the increase in saving in November, some of the recent strength of consumption has come from lower saving with the saving rate falling from 5.3% in May.
The headline PCE price index unexpectedly fell 0.1% m/m (+2.6% y/y) in November, the first monthly decline since April 2020, after an unchanged reading in October. An unchanged reading for November had been expected. The core index (that is, excluding food and energy prices) edged up 0.1% m/m (3.2% y/y), also below expectations, following a downwardly revised 0.1% m/m increase in October (previously +0.2% m/m). Goods prices fell 0.7% m/m (-0.3% y/y) on top of a 0.3% monthly decline in October. Services prices rose 0.2% m/m (+4.1% y/y), the same monthly gain as in October. Food prices fell 0.1% m/m (+1.8% y/y), their first monthly decline since June while energy prices declined 2.7% m/m (-6.0% y/y), the same monthly decline as in October.
Over the past six months the headline PCE price index has increased at a 2.0% annual rate and the core at a 1.9% annual rate. The Fed’s inflation target is 2%. So, some may conclude that the Fed has achieved a return of inflation to its target. While that may be a premature conclusion, to be sure, the recent decline in inflation has been dramatic and should be pleasing to monetary policymakers if it is sustained.
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.
Sandy Batten
AuthorMore in Author Profile »Sandy Batten has more than 30 years of experience analyzing industrial economies and financial markets and a wide range of experience across the financial services sector, government, and academia. Before joining Haver Analytics, Sandy was a Vice President and Senior Economist at Citibank; Senior Credit Market Analyst at CDC Investment Management, Managing Director at Bear Stearns, and Executive Director at JPMorgan. In 2008, Sandy was named the most accurate US forecaster by the National Association for Business Economics. He is a member of the New York Forecasters Club, NABE, and the American Economic Association. Prior to his time in the financial services sector, Sandy was a Research Officer at the Federal Reserve Bank of St. Louis, Senior Staff Economist on the President’s Council of Economic Advisors, Deputy Assistant Secretary for Economic Policy at the US Treasury, and Economist at the International Monetary Fund. Sandy has taught economics at St. Louis University, Denison University, and Muskingun College. He has published numerous peer-reviewed articles in a wide range of academic publications. He has a B.A. in economics from the University of Richmond and a M.A. and Ph.D. in economics from The Ohio State University.
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