The headline data this month shows continued relatively good month-over-month growth in spending. Income growth slowed.

Analyst Opinion of Personal Income and Expenditures

Consumer income growth year-over-year is lower than spending growth year-over-year.

The backward revisions this month were marginally upward. Overall, the expenditure data is little different than last month, but income is down.

  • The market looks at current values (not real inflation adjusted) and was expecting (from Nasdaq / Econoday):.
  •   Consensus Range Consensus Actual Personal Income – M/M change 0.3 % to 0.5 % +0.4 % + 0.2 % Consumer Spending – M/M change 0.2 % to 0.5 % +0.4 % + 0.4 % PCE Price Index — M/M change 0.1 % to 0.2 % +0.1 % + 0.1 % Core PCE price index – M/M change 0.1 % to 0.2 % +0.1 % + 0.2 % PCE Price Index — Y/Y change 2.0 % to 2.3 % +2.0 % + 2.0 % Core PCE price index – Yr/Yr change 1.9 % to 2.1 % +1.9 % + 2.0 %
  • The monthly fluctuations are confusing. Looking at the inflation adjusted 3 month trend rate of growth, disposable income growth rate trend slowed while consumption’s growth rate was unchanged.
  • Real Disposable Personal Income is up 2.9 % year-over-year (published 2.9 % last month and revised to 3.0 %), and real consumption expenditures is up 3.0 % year-over-year (published 3.0 % last month and revised to 3.2 %)
  • The 3Q2018 GDP estimate indicated the economy was expanding at 3.5 % (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 6.2 % this month [last month it was revised downward from 6.6% to 6.4 %].
  • 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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