December 2018 Headline Personal Spending Growth Slowed

The headline data this month shows continued relatively good growth in income.

Analyst Opinion of Personal Income and Expenditures

Note the following from the BEA:

Due to the recent partial government shutdown, this report combines estimates for December 2018 and January 2019. December estimates include both income and outlays measures, while January estimates are limited to personal income. Estimates of outlays for January are unavailable due to a delay in the release of the Census Bureau's Advance Monthly Retail Sales.

Consumer income growth year-over-year is much greater than the spending growth year-over-year.

Savings growth significantly improved this month.

The real issue with personal income and expenditures is that it jumps around - and one cannot take any single month as fixed or gospel.

  • The market looks at current values (not real inflation adjusted) and was expecting (from Econoday):.
December 2018 Consensus Range Consensus Actual
Personal Income - M/M change 0.3 % to 0.5 % +0.4 % + 1.0 %
Consumer Spending - M/M change -0.3 % to 0.3 % -0.2 % - 0.5 %
PCE Price Index -- M/M change 0.0 % to 0.5 % +0.2 % + 0.1 %
Core PCE price index - M/M change 0.2 % to 0.3 % +0.2 % + 0.2 %
PCE Price Index -- Y/Y change 1.7 % to 1.9 % +1.8 % + 1.7 %
Core PCE price index - Yr/Yr change 1.5 % to 2.1 % +1.9 % + 1.9 %
January 2019      
Personal Income - M/M change 0.3 % to 0.5 % + 0.3 % - 0.1 %
  • The monthly fluctuations are confusing. Looking at the inflation-adjusted 3 month trend rate of growth, disposable income growth rate trend improved while consumption's growth rate declined.
  • Real Disposable Personal Income is up 2.9 % year-over-year, and real consumption expenditures is up 2.2 % year-over-year.
  • The latest 4Q2018 GDP estimate indicated the economy was expanding at 2.6 % (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 7.6 % this month [last month it was revised from 6.0% to 6.1 %].
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