Friday, October 01, 2010

August: Real Personal consumption expenditures (PCE) increases 0.2%

by Bill McBride on 10/01/2010 08:30:00 AM

From the BEA: Personal Income and Outlays, August 2010

Personal income increased $59.3 billion, or 0.5 percent ... Personal consumption expenditures (PCE) increased $41.3 billion, or 0.4 percent.
...
Real PCE increased 0.2 percent, the same increase as in July.
...
Personal saving as a percentage of disposable personal income was
5.8 percent in August, compared with 5.7 percent in July.
PCE Two Month estimate Click on graph for large image.

This graph shows monthly real PCE since Q4 2009.  the dashed red lines are the quarterly PCE (note: left scale doesn't start at zero to show the change).

Using the two-month method to estimate PCE, it looks like real PCE growth will be about 2.0% annualized Q3 2010 - or about the same as in the previous two quarters.

This month the saving rate increased slightly ...

Personal Saving rate This graph shows the saving rate starting in 1959 (using a three month trailing average for smoothing) through the July Personal Income report. The saving rate increased to 5.8% in August from 5.7% in July.

I expect the saving rate to rise further - perhaps to 8% or more.

The key in this report is that PCE growth in Q3 will probably be around 2.0% - barring a significant change in September.  This suggests sluggish GDP growth in Q3.