Should it be a surprise that Americans are spending more as their income rises? The U.S. Department of Commerce released a strong reading on personal income and outlays (spending) for the month of October. With gross domestic product being roughly two-thirds influenced by consumer spending, this report and more recent retail sales data should offer some underlying support for fourth-quarter GDP.
Personal income rose by 0.4%, or by $65.1 billion, and disposable personal income rose by 0.5%, or $66.1 billion. Personal consumption expenditures increased by 0.3%, or $34.4 billion, in October. Excluding food and energy, the PCE price index increased by 0.2%.
According to the Commerce Department’s views, the increase in personal income in October primarily reflected increases in wages and salaries and in personal interest income. For a breakdown is expenditures, there was an increase of $11.4 billion in spending for goods and a $2.7 billion increase in spending for services.
Within the spending on goods, the category of “other nondurable goods” (including prescription drugs and recreational items) was the leading contributor to the increase. And within services, the largest gaining contributor was spending for “other services” (including passenger fares for foreign travel and communication services).
Personal outlays increased by $38.7 billion in October, and the personal savings figure was $457.3 billion. The personal saving rate, which tracks personal saving as a percentage of disposable personal income, was 3.2%.
While this is only one month’s worth of data and while it has a month look back, the overall rate of personal income and personal spending should offer a stronger base for the belief of continued growth in the fourth quarter.