The headline data this month shows continued relatively good month-over-month growth in spending. Income growth slowed.
Analyst Opinion of Personal Income and Expenditures
Consumer income growth year-over-year is lower than spending growth year-over-year.
The backward revisions this month were marginally upward. Overall, the expenditure data is little different than last month, but income is down.
The market looks at current values (not real inflation adjusted) and was expecting (from Nasdaq / Econoday):.
| |
Consensus Range |
Consensus |
Actual |
| Personal Income – M/M change |
0.3 % to 0.5 % |
+0.4 % |
+ 0.2 % |
| Consumer Spending – M/M change |
0.2 % to 0.5 % |
+0.4 % |
+ 0.4 % |
| PCE Price Index — M/M change |
0.1 % to 0.2 % |
+0.1 % |
+ 0.1 % |
| Core PCE price index – M/M change |
0.1 % to 0.2 % |
+0.1 % |
+ 0.2 % |
| PCE Price Index — Y/Y change |
2.0 % to 2.3 % |
+2.0 % |
+ 2.0 % |
| Core PCE price index – Yr/Yr change |
1.9 % to 2.1 % |
+1.9 % |
+ 2.0 % |
The monthly fluctuations are confusing. Looking at the inflation adjusted 3 month trend rate of growth, disposable income growth rate trend slowed while consumption’s growth rate was unchanged.
Real Disposable Personal Income is up 2.9 % year-over-year (published 2.9 % last month and revised to 3.0 %), and real consumption expenditures is up 3.0 % year-over-year (published 3.0 % last month and revised to 3.2 %)
The 3Q2018 GDP estimate indicated the economy was expanding at 3.5 % (quarter-over-quarter compounded). Expenditures are counted in GDP, and income is ignored as GDP measures the spending side of the economy. However, over periods of time – consumer income and expenditure grow at the same rate.
The savings rate is 6.2 % this month [last month it was revised downward from 6.6% to 6.4 %].
The inflation-adjusted income and consumption are “chained”, and headline GDP is inflation adjusted. This means the impact to GDP is best understood by looking at the chained numbers. Econintersect believes year-over-year trends are very revealing in understanding economic dynamics.
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