Monday, February 01, 2010

December PCE and Saving Rate

by Bill McBride on 2/01/2010 08:30:00 AM

From the BEA: Personal Income and Outlays, November 2009

Personal Personal income increased $44.5 billion, or 0.4 percent, and disposable personal income (DPI) increased $45.9 billion, or 0.4 percent, in December, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $22.6 billion, or 0.2 percent.
Real PCE -- PCE adjusted to remove price changes -- increased 0.1 percent in December, compared with an increase of 0.4 percent in November.
Personal saving -- DPI less personal outlays -- was $534.2 billion in December, compared with $506.3 billion in November. Personal saving as a percentage of disposable personal income was 4.8 percent in December, compared with 4.5 percent in November.
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 December Personal Income report. The saving rate was 4.8% in December.

I expect the saving rate to continue to rise over the next couple of years - possibly to 8% or more - slowing the growth in PCE.

The following graph shows real Personal Consumption Expenditures (PCE) through December (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.

The question is what happens to PCE growth in 2010?