The headline data this month continues to show consumer expenditure growth. This is positive for 3Q2016 GDP if one considers GDP as a good measure of the economy. The negative of the headlines is that year-over-year income is still growing slower than expenditures.

Analyst Opinion of Personal Income and Expenditures

There was again significant revision – and it is nearly impossible to ACCURATELY trend this data set to ascertain which way is up. When you think you know, the backward revisions reverse what you thought your understood. Nonetheless, the data was relatively strong this month – with the year-over-year growth very strong for the consumer end of the economy. This bodes well for 3Q2016 GDP.

The market looks at current values (not real inflation adjusted) and was expecting (from Bloomberg):.

  Consensus Range Consensus Actual Personal Income – M/M change 0.3 % to 0.6 % 0.4 % +0.4 % Consumer Spending – M/M change 0.2 % to 0.4 % 0.3 % +0.3 % PCE Price Index — M/M change 0.0 % to 0.1 % 0.0 % + 0.0 % Core PCE price index – M/M change 0.1 % to 0.3 % 0.1 % + 0.1 %

The monthly fluctuations are confusing. Looking at the inflation adjusted 3 month trend rate of growth, disposable income growth rate trend accelerated while consumption’s growth rate is decelerating.

Real Disposable Personal Income is up 2.7 % year-over-year (published 2.2 % last month – now revised to 2.6 %), and real consumption expenditures is up3.0 % year-over-year (published 2.8 % last month – now revised to 2.9%)

this data is very noisy and as usual includes moderate backward revision – this month the changes modified the year-over-year trends.

The second estimate of 2Q2016 GDP indicated the economy was expanding at 1.1 % (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 continues to be low historically, and “declined” to 5.7 % this month.