In a reversal of September, income jumped but spending didn’t in October. Here are the details. Servicers are a problem.
The BEA’s Personal Income and Outlays report for October shows real (inflation-adjusted) disposable personal income rose 0.4 percent but real spending rose 0.1 percent.
To arrive at real numbers, subtract the PCE price index spending and income. Rounding accounts for apparent difference (e.g the PCE price index was rounded down to 0.2 but current dollar spending was rounded up to 0.4)
Personal Income
- The $72.3 billion increase in current-dollar PCE PCE in October reflected an increase of $74.7 billion in spending for services and a decrease of $2.3 billion in spending for goods.
- Within services, the largest contributors to the increase were health care (led by hospitals) and housing.
- Within goods, the largest contributor to the decrease was spending for gasoline and other energy goods (led by gasoline and other motor fuel).
Personal Consumption Expenditures
- Personal outlays—the sum of PCE, personal interest payments, and personal current transfer payments—increased $69.8 billion in October.
- Personal saving was $962.7 billion in October and the personal saving rate—personal saving as a percentage of disposable personal income—was 4.4 percent.
- Within goods, the largest contributor to the increase was recreational goods and vehicles. Within services, the largest contributor to the increase was health care (both hospitals and outpatient services).
PCE Price Index
- From the preceding month, the PCE price index for October increased 0.2 percent.
- Prices for goods decreased 0.1 percent and prices for services increased 0.4 percent.
- Food prices increased less than 0.1 percent and energy prices decreased 0.1 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 October increased 2.3 percent. Prices for goods decreased 1.0 percent and prices for services increased 3.9 percent.
- From the same month one year ago, food prices increased 1.0 percent and energy prices decreased 5.9 percent. Excluding food and energy, the PCE price index increased 2.8 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.
Fed Not Exactly Pleased With Report
The Fed is more concerned about inflation in services than goods. Prices for services increased 0.4 percent.
Excluding food and energy, the PCE price index increased 0.3 percent, and that’s not a good number either.
Moreover, Trump is threatening huge increases in tariffs which is inflationary.
November 25: Trump Threatens 25 Percent Tariffs on Mexico and Canada on Day One
Trump says he will unilaterally scrap his own allegedly “Best in History” trade deal with huge tariff hikes on our top two trading partners. Is this constitutional?
November 27: What Industries Will Suffer the Most Under Trump’s Plan to “Make Tariff’s Great Again”?
Trump is upping the rhetoric on Mexico, Canada, and China on top of previous tariff threats. Who will be hardest hit?
Happy Thanksgiving!
Someone explain to me what the heck can the Fed do to lower healthcare inflation. The answer is zilch. But keeping rates high because of healthcare inflation is sure to do a lot of damage to the economy.
Hospitals are essentially mini-monopolies so they have very advantageous pricing power. The Fed doesn’t have any control over monopolistic practices.
It’s a symbiotic relationship of corruption between insurance companies and healthcare providers. The insurance companies are the bigger beneficiaries. The hospital issues an outrageous invoice. Once it’s processed by insurance, the real price drops by as much as 80%. And if the consumer has an 80/20 plan, their “20%” copay is based on the bogus, inflated invoice. So, the consumer might be paying almost 50% of the actual cost. The perceived benefit of insurance is artificially inflated so the consumer dare not go without it. Until fake bills are outlawed and the price is the price without regard to who pays, nothing can be fixed.
That would require government regulation.
The idea that individuals, who for whatever reason, did not adequately prepare for old age should be able to live out the rest of their years inside of their own voluminous and wasteful single family residences AND be carted back and forth to medical facilities on a near daily basis, all at taxpayer expense, is an outrageously luxurious and expensive concept, even for “the west”. That is going to have to change someday. We do have a duty to “take care” of the elderly, but the ones that need the help are going to HAVE TO deliver a “package deal” to the taxpayers.
You should be well aware that if humans didn’t want more, we’d all still be living in caves. We should all rejoyce that peple want more. And in my view they can have as much as they want as long as they earn it. Those who share what they earned will be rewarded in heaven. We hope. Those that don’t share will be some where much less comfortable. We hope.
Wow.
Biden administration is urging Ukraine to lower draft age to 18 from 25 to meet manpower needs to stay in fight with Russia, per AP
I suggest we send Biden, Hunter, and Lindsey Graham
RUB collapsing against Chinese Yuan.
If the consumer is spending less, that means he (temporarily) has his fill. He’ll be back at the trough, though, swilling like the rest of the pigs. Man’s avarice for goods and services knows no limitations — it will never be enough. You could give the average man a million dollars and he would blow it within two years.
There was an interesting video on the rich released a few years back. In it, the founder of Kinko’s was asked if he’d like ANOTHER billion dollars on top of his current billionaire’s status. He thought — very briefly — and said “hell yes.”
There’s something about money that functions like a never-satisfied drug. You can have enough food, enough sex, but when you start seeing the dollar bills pile up you just want that pile to go to the sky…
You can read more of my writings by going to: dark . sport . blog … on the net.
Happy Thanksgiving Mish
Thanks!
Same to everyone!
Are you having a bird or something else?
Ham and Turkey
With neighbors – We are bringing the ham
If you want the best ham and bacon in the world order from yoders meats in Shipshewana IN. They smoke their own bacon and hams. Order the premium boneless or premium bone in. They ship. Due to the holidays they only ship certain days of the week.