November 2018 Headline Personal Spending Growth Good

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

Analyst Opinion of Personal Income and Expenditures

Consumer income growth year-over-year is the same as spending growth year-over-year.

The backward revisions this month were modest. 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):.
  Consensus Range Consensus Actual
Personal Income - M/M change 0.2 % to 0.4 % +0.3 % + 0.2 %
Consumer Spending - M/M change 0.2 % to 0.4 % +0.3 % + 0.4 %
PCE Price Index -- M/M change 0.0 % to 0.1 % +0.1 % + 0.1 %
Core PCE price index - M/M change 0.2 % to 0.2 % +0.2 % + 0.1 %
PCE Price Index -- Y/Y change 1.8 % to 2.0 % +1.6 % + 1.8 %
Core PCE price index - Yr/Yr change 1.8 % to 1.9 % +1.9 % + 1.9 %
  • The monthly fluctuations are confusing. Looking at the inflation adjusted 3 month trend rate of growth, disposable income growth rate trend was little changed while consumption's growth rate also was little changed.
  • Real Disposable Personal Income is up 2.8 % year-over-year, and real consumption expenditures is up 2.8 % year-over-year .
  • The latest 3Q2018 GDP estimate indicated the economy was expanding at 3.4 % (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 6.0 % this month [last month it was revised from 6.2% to 6.1 %].

 

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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