Like retail sales earlier in November, personal income and spending both rose smartly, as shown in the below graph of real retail sales compared with real personal spending:

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Real personal income was up 0.4%, and real personal spending increased by 0.5%:

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Nominally each increased 0.3% more; i.e., the PCE deflator was 0.3%. Each metric only had one better reading in the entire past year.

Since the spring 2021 stimulus ended, personal spending is up 3.9%. Personal income remains down -1.9%, although it has improved in the past few months (thank you, a big decline in gas prices!):

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With real income still down, you may wonder where all the fuel for increased spending has been coming from. The answer is a continuing decline in the saving rate, which at 2.3% for October, was the lowest in the entire 60+ year history of the series, except of one month (July 2005), as shown in the below graph which subtracts -2.3% so that the current level shows as zero:

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In short, both sales and spending - two sides of the same coin - were strong in October, assisted in part by the continuing decline in gas prices. But with near-record-low savings, consumers are more vulnerable to a negative shock than they have ever been.

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