Consumers went on a bit of a shopping spree in September as spending rose more than income.
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.
Still have to see what NFP does.
This stagflationary environment is telling.
08/31/22 was end of Chicago PMI prints above 50 except for one instances
nov 30 2023 55.8
Everything has been under 50 contractionary for manufacturing.
While higher price trend continues, working class in manufacturing has been slow.
Bonds keep acting as if Fed will be printing like Mad.
Yet there will be a dampening effect on economy as Job growth slows which is what is getting forecast for NFP.
Fed tried to preempt Bonds and screwed it up. Not likely they will do that again, but market is certainly saying they will do it again.
Higher rates for Bonds and Gold cracked today which means the inflation premium is coming out of PM’s
If a weak NFP print materializes and Bonds do not react to dampening of labor there is going to be real adversity hitting equities.
It’s Nov 1st. Car dealers are loaded with 2024 inventories. Prices are abnormally high. Incentives are too low. The legacy mfg cut production bc dealers are saturated with old models (2024) and used cars. Their crystal palaces showrooms are almost empty.
Credit card delinquencies are up and the consumer keeps spending. At some point they will not be able to keep increasing their spending and I suspect that this should be a very blue Christmas for retailers.
Inflation should have bottomed in August. Next year inflation will be higher.
“It’s turtles all the way down and inflation all the way up.”
We are reaching the point where all markets are distorted. Stock market having a fit today and with good reason, election & FOMC meeting next week, jobs report tomorrow. Any of the trifecta go south so will the market. Still holding $570 puts on SPY June 2025 and they are ITM right now but I’m gonna be greedy. ….$….$
Yields on the 10yr keep rising.
Yup, it’s perplexing unless those bond vigilantes are finally waking up from their slumber. Rising rates are good for T-bills and my short positions. If they revert back that’ll be good for my long positions.
The important thing is to position to always be profiting.
So the consumer is spending more than he’s bringing in. What else is new. We live in a credit card economy where the line-of-credit represented by the Card is a lifeline to many.
The government has the biggest credit card of all in the form of the printing press. The inflation we’re currently seeing is the result of pandemic-era pump-priming that overstimulated a not-too-stagnant economy. Because of that, inflation has been persistent in services (less so in durable goods).
Inflation, a shadowy goblin haunting the bright woods of the Economy, continues to kick our ass. In Toronto, people are seeing their rent go from C$2,000 a month to C$3,200 as landlords price-gouge in appreciation of new renting realities. They have to move. All those immigrants Trudeau took in are competing with native-born Canadians for ideal rent spots. And they ain’t making many more of those.
In the Sun Belt, the illegal immigrants continue to undercut the unskilled job market for workers. White working class and black potential employees are hit hardest. As usual, the bulk of the increase in real wages goes to the upper percentiles of workers, not the lowest. Things could get ugly.
(You can read more of my writings by going to: dark-dot-sport-dot-blog where -dot- is a period.)
As DR. Ravi Batra pointed out in his book: “Greenspan’s Fraud”:
“If demand and supply are to be balanced over time, then either wages rise in sync with productivity, or productivity growth must be matched by the growth of wages plus debt…so debt growth was the only way to maintain demand-supply equilibrium from the 1970s till today.”
“As usual, the bulk of the increase in real wages goes to the upper percentiles of workers, not the lowest.”
My kid just got a 9% pay raise. People who can operate an HPLC are in short supply.
Off topic: The Fed just updated the FY ’24 Q3 Annualized interest expense. Granted, this is a projection for the next 12 months, so the actual expense could be more or less, based on interest rates.
FYI – Q2 was $1.09T and now Q3 was $1.12T.
Now keep in mind, we did very little borrowing in FY Q3, so no surprise that the increase was so small. However, FY Q4 we started to see borrowing renewed bonanza.
A solid $1.25T might be in the cards?
“Disposable Income Up 0.1 Percent”
Postal workers just got a new contract with 1.3% raises. Same crap raises as before the scamdemic. They have a worthless COLA so even with the ‘raises’ they are behind 10% since 2019.
Between May and Sept the annual PCE was rising at a smaller and smaller pace, down from 2.6% to 2.1% Y/Y, but ex food and energy it’s up each month by 2.7% Y/Y. The healthcare sector charge us more and more money. They will never stop, unless we change our diet.
In the last four years, since Apr 2020, the nominal PCE is up $8T from $12T to $20T, up vertically 66%, about 14%/Y. That is twice as much as rent.
Renters will decide this election Im told
random taunts out of the blue put people on thin ice
Who am I taunting? Renters? I agree with you.
Of course, mileage varies. But my understanding is the savings rate is still close to 5%, so this much (primarily consumer) spending is occurring and people (on average) still have fuel left in the tank for tomorrow
I think the savers and the spenders are different people.
Savings rate is lower than that. Also the 7th of 8 months that savings rate declined. People are on fumes.
Mathematically (or at least statistically) impaired:
Savings rate (for the average American) has ranged from 4.4-5.3% every month for the last year and a half.
That matches very closely with the rate for the 6 entire years of 2013-2018 when the economy was doing very well pre-COVID.
That sounds like the interest rate, not the savings rate.
Fred can be your friend, too
https://fred.stlouisfed.org/series/PSAVERT
They just haven’t hit their credit limit(s) yet.
up 0.1% unless you count food, fuel, medical, and insurance?
I am not garbage
Definitely not, but a little annoying always being OT
To each his own, I guess. I’m glad the elections will be over in less than a week so you can live your life more fully being less consumed with political pandering
I’m undecided
BS. If you’re undecided, why are you worried about being called (incorrectly) “garbage”?
Well I also grew up in a middle class family. I feel like she’s speaking to me. Also her job as border czar was exceptional. It’s really a tough choice.
Her eloquence is captivating.
I’m afraid for her. If she loses, Doug will beat the crap out of her.
Or they’ll get two new Swedish Nannies.
Very true. I find her mesmerizing for sure. It’s why I’m having such a tough time with who to vote for. A gentle breeze sends me in all different directions. But wow what a speaker. So genuine and so unrehearsed. Like Lincoln. That’s who she reminds me of.
Lol I get the feeling these are just humorous sarcasm directed against cameltoe
Ya think
Awww poor little trash man.
No one ate my dog.