This Morning’s Key Economic Data - Personal Spending, Income and Savings (October 2009)

November 25, 2009 – This Morning’s Key Economic Data – Personal Income and Spending – Personal income increase by 0.2%, disposable income increased by 0.4% and personal consumer increased by 0.7% in October. This is being read as good news on the Street and in most economists’ corners, but we think it is less so, given that spending is outpacing income resulting in less savings.

While this morning’s weekly jobless claims was a welcome one, showing a dip below 500,000,  the economy is still losing jobs and unemployment remains on the rise. Meanwhile consumer balance sheets remain in disarray. Delinquencies on credit card payments and mortgages continue to increase, and so do foreclosures. In this environment, we would like to see savings strengthening.

Excerpt from Press Release:

PERSONAL INCOME AND OUTLAYS: OCTOBER 2009

Personal income increased $30.1 billion, or 0.2 percent, and disposable personal income (DPI) increased $45.7 billion, or 0.4 percent, in October, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $68.3 billion, or 0.7 percent.  In September, personal income increased $20.7 billion, or 0.2 percent, DPI increased $21.3 billion, or 0.2 percent, and PCE decreased $60.3 billion, or 0.6 percent, based on revised estimates.

Real disposable income increased 0.2 percent in October, compared with an increase of  0.1 percent in September.  Real PCE increased 0.4 percent, in contrast to a decrease of 0.7 percent.

Wages and salaries

Private wage and salary disbursements increased $2.1 billion in October, in contrast to a decrease of $6.2 billion in September.  Goods-producing industries' payrolls decreased $3.3 billion, compared with a decrease of $6.8 billion; manufacturing payrolls decreased $3.6 billion, compared with a decrease of $0.3 billion.  Services-producing industries' payrolls increased $5.4 billion, compared with an increase of $0.6 billion.  Government wage and salary disbursements increased $0.6 billion, in contrast to a decrease of $1.7 billion.

Other personal income

Supplements to wages and salaries increased $1.3 billion in October, compared with an increase of $0.4 billion in September.

Proprietors' income increased $10.0 billion in October, compared with an increase of $2.5 billion in September. Farm proprietors' income increased $4.6 billion, in contrast to a decrease of $1.4 billion.  Nonfarm proprietors' income increased $5.4 billion, compared with an increase of $3.9 billion.

Rental income of persons increased $4.3 billion in October, compared with an increase of $5.2 billion in September.  Personal income receipts on assets (personal interest income plus personal dividend income) increased $4.8 billion, in contrast to a decrease of $2.0 billion.  Personal current transfer receipts increased $7.2 billion, compared with an increase of $21.6 billion.

Contributions for government social insurance -- a subtraction in calculating personal income – increased $0.2 billion in October, in contrast to a decrease of $0.9 billion in September.

Personal current taxes and disposable personal income

Personal current taxes decreased $15.6 billion in October, compared with a decrease of $0.7 billion in September. Disposable personal income (DPI) -- personal income less personal current taxes -- increased $45.7 billion, or 0.4 percent, in October, compared with an increase of $21.3 billion, or 0.2 percent in September.

Personal outlays and personal saving

Personal outlays -- PCE, personal interest payments, and personal current transfer payments -- increased $65.8 billion in October, in contrast to a decrease of $60.6 billion in September.  PCE increased $68.3 billion, in contrast to a decrease of $60.3 billion.

Personal saving -- DPI less personal outlays -- was $490.3 billion in October, compared with $510.4 billion in September.  Personal saving as a percentage of disposable personal income was 4.4 percent in October, compared with 4.6 percent in September.  For a comparison of personal saving in BEA’s national income and product accounts with personal saving in the Federal Reserve Board’s flow of funds accounts and data on changes in net worth, go to http://www.bea.gov/national/nipaweb/Nipa-Frb.asp.

Real DPI, real PCE and price index

Real DPI -- DPI adjusted to remove price changes -- increased 0.2 percent in October, compared with an increase of 0.1 percent in September.

Real PCE -- PCE adjusted to remove price changes -- increased 0.4 percent in October, in contrast to a decrease of 0.7 percent in September.  Purchases of durable goods increased 2.0 percent, in contrast to a decrease of 8.7 percent.  Purchases of motor vehicles and parts accounted for the increase in October and accounted for most of the decrease in September.  The September decrease reflected the impact of the CARS program (popularly called “cash for clunkers”), which had boosted motor vehicle sales in July and in August.  For further information on how the CARS program is reflected in the GDP statistics, please see the FAQ at BEA’s Web site, http://www.bea.gov, “How will the federal Consumer Assistance to Recycle and Save Act of 2009 (i.e., the CARS program) be reflected in the National Income and Product Accounts (NIPAs)?”  Purchases of nondurable goods increased 0.2 percent in October, compared with an increase of 0.6 percent in September. Purchases of services increased 0.3 percent, compared with an increase of 0.2 percent.

PCE price index -- The price index for PCE increased 0.3 percent in October, compared with an increase of 0.1 percent in September.  The PCE price index, excluding food and energy, increased 0.2 percent, compared with an increase of 0.1 percent.

Revisions

Estimates of personal income have been revised for April through September; estimates of PCE have been revised for July through September.  Changes in personal income, current-dollar and chained (2005) dollar DPI, and current-dollar and chained (2005) dollar PCE for August and September -- revised and as published in last month's release -- are shown below.

For April through June, the revisions to wages and salaries reflected the incorporation of newly available BLS tabulations for second-quarter private wages and salaries from the quarterly census of employment and wages.  Wages and salaries were revised up for all three months.  Revisions to personal current taxes reflected the revision to wages and salaries and the incorporation of revised annual targets based on collections data from Monthly Treasury Statements.

Beginning in July, revisions to personal current transfer receipts reflect updated estimates of the impact of the American Recovery and Reinvestment Act of 2009 (ARRA).