Wednesday, December 23, 2009

November PCE and Saving Rate

by Bill McBride on 12/23/2009 08:30:00 AM

From the BEA: Personal Income and Outlays, November 2009

Personal income increased $49.7 billion, or 0.4 percent, and disposable personal income (DPI) increased $54.1 billion, or 0.5 percent, in November, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $47.9 billion, or 0.5 percent.
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Real PCE -- PCE adjusted to remove price changes -- increased 0.2 percent in November, compared with an increase of 0.4 percent in October.
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Personal saving -- DPI less personal outlays -- was $525.1 billion in November, compared with $516.7 billion in October. Personal saving as a percentage of disposable personal income was 4.7 percent in November, the same as in October.
Personal Saving RateClick on graph for large image.

This graph shows the saving rate starting in 1959 (using a three month centered average for smoothing) through the November Personal Income report. The saving rate was 4.7% in November.

I expect the saving rate to continue to rise - possibly to 8% or more - slowing the growth in PCE.

The following graph shows real Personal Consumption Expenditures (PCE) through November (2005 dollars). Note that the y-axis doesn't start at zero to better show the change.

PCE The quarterly change in PCE is based on the change from the average in one quarter, compared to the average of the preceding quarter.

The colored rectangles show the quarters, and the blue bars are the real monthly PCE.

Using the two-month method for estimating Q4 PCE growth gives an estimate of just under 1%. However - note that PCE in August was distorted by the cash-for-clunkers program. So my guess is PCE growth in Q4 will be around 1.7%.