Personal Spending Growth Was Modest in October, Extending the Robust Gain from September

The Bureau of Economic Analysis said that personal spending rose modestly in October, up 0.3 percent. As such, the latest increase in personal consumption expenditures extended the robust 0.9 percent gain seen in September, which was the fastest monthly pace since August 2009. In October, the goods spending data were mixed, with nondurable goods purchases up by 0.2 percent but with durable goods outlays edging down by 0.1 percent. With that said, the longer-term picture remains favorable, as Americans have continued to spend at relatively healthy rates overall. Indeed, personal spending has increased 4.2 percent over the past 12 months, off slightly from 4.3 percent year-over-year in the previous release. In addition, goods spending for durable and nondurable goods were up 3.8 percent and 4.2 percent year-over-year, respectively.

Likewise, the savings rate has fallen from 4.1 percent in October 2016 to 3.2 percent in the current data, highlighting the degree to which Americans have become more willing to spend. At the same time, the savings rate did increase from 3.0 percent in September, largely on stronger income growth.

Along those lines, personal incomes rose by 0.4 percent in October, continuing the solid pace seen in September. Over the past 12 months, personal incomes have risen 3.4 percent, up from 2.9 percent year-over-year in September. In addition, manufacturing wages and salaries edged higher for the month, up from $836.1 billion in September to $840.6 billion in October. That translated into a 2.6 percent increase in manufacturing wages and salaries over the past 12 months, up from $819.0 billion in October 2016.

In other news, the personal consumption expenditure (PCE) deflator inched up 0.1 percent in October, pulling back from the 0.4 percent increase in September. A fair share of the jump in pricing pressures in the prior figures stemmed from recent hurricanes, especially in energy costs. In October, energy prices were down 1.1 percent, declining after sizable jumps in both August and September. Core inflation—which excludes food and energy—rose 0.2 percent in October.

Overall, pricing pressures remain quite modest. After seeing pricing pressures accelerate strongly earlier this year—with the PCE deflator peaking at 2.2 percent year-over-year in February—inflation has pulled back since then. Since October 2016, the PCE deflator has increased 1.6 percent, down slightly from 1.7 percent in September. Core PCE inflation was up 1.4 percent year-over-year in October, the same pace as in September but down from 1.9 percent in January.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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