Consumer spending rose a tepid 0.1% after adjusting for inflation in October. That follows a slight downward revision to September, which was extremely strong as consumers scrambled to replace and repair property in the wake of hurricanes. The composition of spending was still heavily weighted toward big-ticket items, such as vehicles, furniture and appliances as well as services. Spending on nondurable goods such as clothing fell sharply during the month. We expect the bifurcation of spending between big-ticket durable goods and services to continue into the holiday season.
Posts in category Consumers
Personal disposable incomes flatlined in September on an inflation-adjusted basis after slipping 0.1% in August. A sharp increase in prices at the gas pump and losses in hourly earnings associated with the back-to-back hurricanes Harvey and Irma accounted for some of that weakness. The rise in prices at the pump may be a temporary phenomenon as refiners idled by Harvey came back on line. Global demand factors have kept energy prices much higher than expected as we enter the critical holiday shopping season, which starts with Halloween.
Harvey Effects Seep into Data
Personal incomes and consumer spending both contracted by 0.1%, after adjusting for inflation in August. Increases in consumer spending were largely in health care.
Effects of Hurricane Harvey, which hit landfall on August 25, had a minor impact on the data. We will see larger disruptions from Harvey and Hurricane Irma in the reports for September.
The devastation and humanitarian crisis triggered by Hurricane Maria will show up on the margins because data for Puerto Rico are not included in the national data. Ripple effects will show up initially as a blow to tourism from trips cancelled to the island. We will have to absorb the economic costs associated with the likely migration of survivors to the mainland.
Prices Tepid, but Poised to Rebound with Harvey
Personal disposable incomes and consumer spending both rose 0.2% after adjusting for ,inflation in July. Personal incomes were supported by strong employment gains and returns from higher asset prices. Gains in big-ticket durables were concentrated in furniture and appliances, reflecting earlier gains in home sales and the desires to remodel and upgrade existing homes. The effects of Hurricane Harvey will not show up in those sectors until the waters recede and clean-up can begin in September.
Consumer spending slowed in June as personal incomes contracted slightly. The figures mark a disappointment for financial markets, where expectations were for incomes and spending to post gains closer to the elevated pace of May. Both series were revised down for the previous month, but up for the first quarter. The overall picture shows the consumer stronger than it appears at first glance for the first half of 2016.
Personal disposable incomes jumped an inflation-adjusted 0.6% in May, the fastest pace since April 2015. A combination of weaker inflation, the buoyancy of the stock market and resulting surge in dividend income were drivers of those gains. Wages and salaries were also strong as employment continued to rise, albeit at a slower pace in May.
Personal consumption expenditures (PCE), which is a broader measure of consumer spending than retail sales, rose a tepid 0.1% after adjusting for inflation; that was a disappointment.
Consumer spending and personal disposable income both rose 0.2% in April after adjusting for inflation, a slowdown from the pace of March. The spending data for March, however, was revised up substantially, which means the consumer remains a primary driver of growth for the U.S. economy. This affirms our view that the U.S. economy will reaccelerate after a winter lull and overall growth will remain firmly in the 2% range in the first half of the year.
Personal disposable income jumped 0.5% after adjusting for inflation in March. That follows downward revisions for the previous two months. The March increase in incomes occurred despite weaker employment and wage growth for the month. Much of the increase came from a jump in social security payments, something that will become a larger factor as more baby boomers move into their retirement years.
Personal consumption expenditures rose 0.3% after adjusting for inflation but followed downward revisions to January and February. Moreover, all of the increase in spending may be attributed to a rebound in spending on utilities when temperatures plummeted after an unusually warm winter. Spending outside of utilities was weak. Much of that weakness, however, is transitory and already showing signs of a rebound during the second quarter.
Perhaps most importantly for those watching the Federal Reserve and what might be decided this week: Both the overall and core measures of the PCE inflation index dropped. This is the Fed’s favored measure of inflation. Read More »
The personal consumption expenditure (PCE) index rose 0.1% in February from January and 2.1% from a year ago. That was the first time the index moved above the Federal Reserve’s 2% target since April 2012. It is important to note that a low base on energy prices one year ago contributed to that gain. The core (nonfood and nonenergy) PCE rose 0.2% between the two months and edged up to a 1.8% gain on a year-over-year basis. That is within a margin of error on the 2% Fed target. The stars are aligned for at least two additional rate hikes
Personal disposable incomes came in slightly higher in December on an inflation-adjusted basis. Added t0 an upward revision for November, that leaves us close to our forecast target.
Personal consumption expenditures, which include services like health care, rose 0.3% after adjusting for inflation. Those increases added to upward revisions for November affirm our view that the consumer remains in good shape