The BEA’s Personal Income and Outlays report for September shows real (inflation-adjusted) disposable personal income rose 0.1 percent but real spending rose 0.4 percent.

To arrive at real numbers, subtract the PCE price index spending and income. Rounding yields a slightly higher than expected number of real spending.

Personal Income

• Personal income increased $71.6 billion (0.3 percent at a monthly rate).
• Disposable personal income (DPI), personal income less personal current taxes, increased $57.4 billion (0.3 percent).
• The increase in current-dollar personal income in September primarily reflected increases in compensation and personal current transfer receipts that were partly offset by decreases in personal interest income and proprietors’ income

Personal Consumption Expenditures

• Personal consumption expenditures (PCE) increased $105.8 billion (0.5 percent).
• The $105.8 billion increase in current-dollar PCE in September reflected an increase of $72.1 billion in spending for services and an increase of $33.7 billion in spending for goods
• Within services, the largest contributors to the increase were health care and housing and utilities (led by housing).
• Within goods, the largest contributors to the increase were other nondurable goods (led by prescription drugs), food and beverages, and motor vehicles and parts (led by new light trucks). These increases were partly offset by a decrease in gasoline and other energy goods.

PCE Price Index

• Prices From the preceding month, the PCE price index for September increased 0.2 percent.
• Prices for goods decreased 0.1 percent and prices for services increased 0.3 percent.
• Food prices increased 0.4 percent and energy prices decreased 2.0 percent.
• Excluding food and energy, the PCE price index increased 0.3 percent.
• From the same month one year ago, the PCE price index for September increased 2.1 percent. Prices for goods decreased 1.2 percent and prices for services increased 3.7 percent.
• Food prices increased 1.2 percent and energy prices decreased 8.1 percent.
• Excluding food and energy, the PCE price index increased 2.7 percent from one year ago.

PCE vs CPI

The PCE price index is the Fed’s preferred measure of inflation.

PCE includes prices paid on behalf of consumers such as Medicare and corporate health insurance.

The CPI only counts items directly paid by consumers.

As a result of those methodology differences, the CPI overweighs rent while the PCE overweighs health care.

Both indexes are flawed because neither includes home prices, only rent. In general, inflation matters, not just consumer inflation.

Record High Home Prices

On September 28, I reported Yet Another Record High for Case-Shiller Home Prices

The pre-pandemic Case-Shiller national index was 370.9. Now it’s 553.1.

Home prices are up 49 percent in less than five years. And thanks to Fed QE wizardry, people could have and did refinance their mortgage at 3.0 percent or even less.

The Housing Boom Economists Expected in 2024, Was a Bust

On October 26, I commented The Housing Boom Economists Expected in 2024, Was a Bust

Phoenix Leads the Nation in Evictions

Yesterday, I noted Phoenix Leads the Nation in Evictions, It’s a Yes-No Question

The Fed has destroyed housing with its boom-bust interest rate and QE manipulations.

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