Adjusted for inflation, both personal income and spending came in positive once again in November. But under the hood, the report looked a little tepid, and while it certainly wasn’t recessionary, the data was consistent with what I would expect later in the cycle of an expansion.

For the record, real income rose 0.2% for the month, and real spending increased 0.3%, continuing their consistent trend since mid-year 2022:

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Real income less government transfers, one of the metrics that the NBER looks at to determine economic expansions vs. recessions, also increased, by 0.1%, in November, continuing its uptrend as well:

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Last month the headlines were mainly about inflation. I demurred. And that was burne out by the mild 0.1% increase in prices this month, average for the past year:

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Indeed, in the seven months since April prices have only risen a total of 0.9%, for a 1.6% annual rate, below the Fed’s target. 

On a YoY basis, prices increased 2.4%, up from 2.1% in September (blue in the graph below). This was all about services (gold), which are up 3.8% YoY, their approximate YoY advance for the past six months. On a YoY basis, goods (red) are still in mild *deflation*:

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On a monthly basis, the deflation in goods prices appears to be ending. Prices rose very slightly (less than 0.1%) in November:

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The YoY comparison is elevated all because of services, as this long term graph shows:

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In contrast with the CPI, only about 0.3% of that YoY rate is housing.

If goods deflation is no longer a tailwind, and services inflation remains elevated, that is a typical late cycle configuration.

Also looking late cycle-ish was the personal saving rate at 4.4%, down from 5.5% last January.  As the below longer term historical graph which subtracts the current rate to show it at the zero line shows, the current saving rate is equivalent to that late in the last two expansions (not counting the pandemic):

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Basically, as an expansion goes along, consumers get further out over their skis, and so more vulnerable to an adverse shock.

Finally, the PCE price index is used to calculate real manufacturing and trade sales (with a one month lag), another metric used by the NBER to determine if the economy is in recession or not. This declined -0.1% in October, but as the pot-pandemic graph below shows, its uptrend remains intact:

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So the good news is that this very important report on the health of the consumer remained positive in November, consistent with its trend since June 2022. There wasn’t any bad news. But the continued elevation in the services price index and the low level of savings suggest that we are later in this expansion cycle. 

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