Friday, November 30, 2012

Personal Income unchanged in October, Spending decreased 0.2%

by Bill McBride on 11/30/2012 08:47:00 AM

The BEA released the Personal Income and Outlays report for October:

Personal income increased $0.4 billion, or less than 0.1 percent ... in October, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) decreased $20.2 billion, or 0.2 percent.
...
The October estimates of personal income and outlays reflect the effects of Hurricane Sandy, which made landfall in the United States on October 29. The storm affected 24 states, with particularly severe damage in New York and New Jersey. BEA cannot quantify the total impact of the storm on personal income and outlays because most of the source data used to estimate these components reflect the effects of the storm and cannot be separately identified. However, BEA did make adjustments where source data were not yet available or did not reflect the effects of Sandy. The largest of these adjustments was for work interruptions, which reduced wages and salaries by about $18 billion (at an annual rate).

Real PCE -- PCE adjusted to remove price changes -- decreased 0.3 percent in October, in contrast to an increase of 0.4 percent in September. ... The price index for PCE increased 0.1 percent in October, compared with an increase of 0.3 percent in September. The PCE price index, excluding food and energy, increased 0.1 percent in October, the same increase as in September.
...
Personal saving -- DPI less personal outlays -- was $410.1 billion in October, compared with $391.3 billion in September. The personal saving rate -- personal saving as a percentage of disposable personal income -- was 3.4 percent in October, compared with 3.3 percent in September.
The following graph shows real Personal Consumption Expenditures (PCE) through October (2005 dollars). Note that the y-axis doesn't start at zero to better show the change.

Personal Consumption Expenditures Click on graph for larger image.

This graph shows real PCE by month for the last few years. The dashed red lines are the quarterly levels for real PCE. According to the BEA, Hurricane Sandy impacted PCE in October, but the BEA could not quantify the total impact - however PCE in October was weak.

A key point is the PCE price index has only increased 1.7% over the last year, and core PCE is up only 1.6%.

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