Personal Income and Outlays Under Pressure
Posted on Friday, October 30, 2009
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RTT News with details of the latest release: With consumers saving more as a result of economic uncertainty, the Commerce Department released a report on Friday showing that personal spending decreased in September, while personal income came in nearly unchanged.
The report showed that personal spending fell by 0.5 percent in September following an upwardly revised 1.4 percent increase in August. The moderate pullback in personal spending came in line with the expectations of economists.
Additionally, the Commerce Department said that personal income decreased by less than 0.1 percent in September after edging up by a revised 0.1 percent in the previous month. Economists had expected income to be unchanged.
More important is longer term trends. Broken down below are the components of personal income over the past three years. The broad theme is decreased income, increased savings, yet relatively steady consumption.
Looking closer at the year over year changes in each, we do see a paradigm shift between consumption and savings, which has been partially eased by the reduction in taxes allowing consumers to spend more on the margin over the past year.
This is all in the face of the pulling of demand from the future into the latest quarter (i.e. consumption "should" have been much less) due to the cash for clunkers program.
The question is what happens now? More on that in a bit.
Source: BEA
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Source: http://econompicdata.blogspot.com/2009/10/personal-income-and-outlays-under.html
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