Consumer Spending up 0.1%, Personal Income increases 0.4%, for October 2011

The Personal Income and Outlays report for October covers individual income, consumption and savings. Consumer spending increased 0.1% while disposable income has increased 0.3%. Personal income finally came alive, the first time breaking flat line since March, to a 0.4% monthly increase. While consumer spending is mute, if you think people shopped less in October to gear up for Black Friday, think again. This report is seasonally adjusted.

Personal consumption expenditures are often called consumer spending and in real dollars, or adjusted for price increases, is up 0.1% for October. Real Personal Consumption Expenditures, or PCE, are about 70% of GDP, so this isn't too great as a start for Q4 GDP growth. Real means chained to 2005 dollars, or adjusted for inflation. Below is a graph of real PCE.



Consumer spending is not just smartphones, toys and Starbucks. Things like housing, healthcare, food, gas are part of consumer spending. So, next time you think people are blowing money they don't actually have on ridiculous cell phone plans, think again. Health care is a necessity. Graphed blow is the overall real PCE monthly percentage change.



Here's what people spent money on in October, adjusted for prices. Health care, for example, is a service.

Purchases of durable goods increased 0.9 percent, compared with an increase of 3.3 percent. Purchases of nondurable goods increased 0.2 percent, compared with an increase of 0.4 percent. Purchases of services decreased less than 0.1 percent, in contrast to an increase of 0.1 percent.

The PCE price index decreased -0.1% for the month, up +1.7% for the year. Minus energy and food the price index increased +0.1% and is also up +1.7% for the year. The energy index decreased –2.0% in for October and is up 15.1% for the year. The food price index increased +0.1% for October and is up +5.1% for the year. The PCE price index represents inflation, and is different from CPI. The price index is what is used to compute real consumer spending, or spending adjusted for inflation.

Personal income increased +0.4% in October, which is much better than last month's +0.1% increase. Below is personal income, not adjusted for inflation, or price changes.



Real personal income, or personal income adjusted for inflation, via the PCE price index, was up +0.4% for October. Finally, an increase from last month's zero. The monthly percentage change of real personal income hasn't increased like this since January and has been negative the previous three months. Below is the graph of real personal income. While personal income is everybody, all income in the U.S., we can see it's below pre-recession levels when adjusted for inflation.



Disposable income is what is left over after taxes. DPI (disposable income), increased +0.3% from September to October. DPI adjusted for inflation (see the price indexes above), also increased +0.3%. These numbers are aggregates, which includes income of the uber-rich, or the 1% of the population, as they are now called.



Below is real disposable income per capita. Per capita means evenly distributed per person and population increases every month. October mid-month the U.S. population was 313,327,000 and increased 214,000 from September.



Interesting reality check huh? An increase in personal income, when spread across increased population growth and adjusted for inflation shows it's often not great news, which makes declines even more miserable. The numbers reported in the press headlines are aggregates, or the total, regardless of how many more people are in the country.

The monthly percentage change for wages and salaries was +0.5%, with total employee compensation, which includes wages, salaries, increasing +0.5%. Proprietor income dropped –0.3%. This is income from non-incorporated businesses, such as the self-employed.

Private wage and salary disbursements increased $33.6 billion in October, compared with an increase of $28.2 billion in September. Goods-producing industries' payrolls increased $6.3 billion, compared with an increase of $5.6 billion; manufacturing payrolls increased $6.4 billion, compared with an increase of $2.4 billion. Services-producing industries' payrolls increased $27.3 billion, compared with an increase of $22.6 billion. Government wage and salary disbursements decreased $0.4 billion, compared with a decrease of $1.9 billion.

Below are wages and salaries for the past decade. Notice the dip and the more flat line than earlier in the decade. Bear in mind these are aggregate, or all wages and salaries, and not adjusted for inflation.



Below is personal income minus personal current transfer receipts. This graph shows how much personal income increased that wasn't funded by the government and is used as a recession indicator. Transfer receipts are payments from the government to individuals where no actual services (work) was performed. This includes social security, unemployment insurance, welfare, veterans benefits, Medicaid, Medicare and so on. This month, in chained 2005 dollars, real personal income minus transfer receipts increased +0.4% from last month's zero change. Notice real personal income minus transfer receipts is below pre-recession levels. In other words, real income, has not recovered and no surprise from the jobs crisis alone.



Personal savings is disposable income minus outlays, or consumption and not adjusted for inflation. The Personal Savings Rate was 3.5% in October, an increase from September's 3.3% rate. Annualized, this is a 23.3% increase in comparison to a -70.1% plunge for last month. Annualized seasonally adjusted rates are much larger than monthly percentages, still we see for Q3, the personal savings rate annualized dropped -121.9%. That's bad news and implied people were using savings to survive.




Below is disposable personal income minus personal consumption expenditures monthly raw total changes.



Personal Outlays are PCE, personal interest payments, and personal current transfer payments. PCE is defined above by percentages is almost all of personal outlays. Personal interest payments are things like the interest you pay on your credit card. Personal transfer payments are defined as:

Payments consisting of transfer payments by persons to government and to the rest of the world. Payments to government include donations, fees, and fines paid to Federal, state, and local governments, formerly classified as "personal nontax payments."

In other words, personal transfer payments are nothing more than that speeding ticket you just got or how you just donated to this site. People often confuse transfer payments with transfer receipts, not the same thing.

To visualize more data from this report, consider playing around with more of the St. Louis Federal Reserve Fred graphs.

Here is September's report overview, not revised.

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