Thursday, December 23, 2010

Comments on November Personal Income and Outlays Report

by Bill McBride on 12/23/2010 11:58:00 AM

The BEA released the Personal Income and Outlays report for November this morning.

Personal income increased $42.3 billion, or 0.3 percent ... Personal consumption expenditures (PCE) increased $43.3 billion, or 0.4 percent.
...
Real PCE -- PCE adjusted to remove price changes -- increased 0.3 percent in November, compared with an increase of 0.5 percent in October.
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.

Personal Consumption Expenditures Click on graph for large image.

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 two-month method of estimating real PCE growth for Q4 (a fairly accurate method), suggests real PCE growth of 4.3% in Q4! So this looks like a pretty strong quarter for growth in personal consumption. The last time real PCE grew at more than 4% was in 2006.

Also personal income less transfer payments increased again in November. This increased to $9,305 billion (SAAR, 2005 dollars) from $9,282 billion in October. This measure had stalled out over the summer.

Personal Income less Transfer This graph shows real personal income less transfer payments as a percent of the previous peak. This has been slow to recover - and is still 4.5% below the previous peak - but personal income less transfer payments is growing again.

Some of the increase in spending came from a decline in the personal saving rate, but overall this was a positive report and suggests solid GDP growth in Q4 (3% or higher).