Posted by Joseph Y. Calhoun, III

Personal income and spending rose last month:

Personal income increased $49.7 billion, or 0.4 percent, and disposable personal income (DPI)
increased $54.1 billion, or 0.5 percent, in November, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $47.9 billion, or 0.5 percent. In October, personal income increased $33.6 billion, or 0.3 percent, DPI increased $50.2 billion, or 0.5 percent, and PCE increased $63.5 billion, or 0.6 percent, based on revised estimates.

Real disposable income increased 0.2 percent in November, the same increase as in October. Real PCE increased 0.2 percent in November, compared with an increase of 0.4 percent in October.

This is better than expected and the details are quite positive. My comments are in bold below:

Wages and salaries

Private wage and salary disbursements increased $16.1 billion in November, compared with an increase of $3.2 billion in October. Goods-producing industries’ payrolls increased $0.4 billion, in contrast to a decrease of $2.0 billion; manufacturing payrolls increased $1.6 billion, in contrast to a decrease of $2.4 billion. Services-producing industries’ payrolls increased $15.7 billion, compared with an increase of $5.2 billion. Government wage and salary disbursements increased $1.7 billion, compared with an increase of $2.8 billion. If wages and salary disbursements are rising at this rate, payrolls are probably expanding or will be soon.

Other personal income

Supplements to wages and salaries increased $2.1 billion in November, compared with an increase of $1.6 billion in October.

Proprietors’ income increased $12.3 billion in November, compared with an increase of $14.8 billion in October. Farm proprietors’ income increased $7.0 billion, compared with an increase of $6.9 billion. Nonfarm proprietors’ income increased $5.3 billion, compared with an increase of $7.9 billion.

Rental income of persons increased $1.7 billion in November, compared with an increase of $2.2 billion in October. Personal income receipts on assets (personal interest income plus personal dividend income) increased $6.7 billion, compared with an increase of $6.6 billion. Personal current transfer receipts increased $11.3 billion, compared with an increase of $2.8 billion.

Contributions for government social insurance — a subtraction in calculating personal income — increased $2.3 billion in November, compared with an increase of $0.5 billion in October. Again, this probably means payrolls are now expanding since there hasn’t been any increase in the rate.

Personal current taxes and disposable personal income

Personal current taxes decreased $4.5 billion in November, compared with a decrease of $16.7 billion in October. Disposable personal income (DPI) — personal income less personal current taxes — increased $54.1 billion, or 0.5 percent, in November, compared with an increase of $50.2 billion, or 0.5 percent in October. This is why personal consumption was able to rise. Unfortunately, taxes will be rising in the next couple of years.

Personal outlays and personal saving

Personal outlays — PCE, personal interest payments, and personal current transfer payments — increased $45.7 billion in November, compared with an increase of $61.3 billion in October. PCE increased $47.9 billion, compared with an increase of $63.5 billion.

Personal saving — DPI less personal outlays — was $525.1 billion in November, compared with
$516.7 billion in October. Personal saving as a percentage of disposable personal income was
4.7 percent in November, the same as in October. 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.

I’d like to see the savings rate even higher, but at least it is stabilizing. More savings may mean less consumption today, but it also means more invesment tomorrow and that is what the economy really needs.

Real DPI, real PCE and price index

Real DPI — DPI adjusted to remove price changes — increased 0.2 percent in November, the same increase as in October.

Real PCE — PCE adjusted to remove price changes — increased 0.2 percent in November, compared with an increase of 0.4 percent in October. Purchases of durable goods increased 1.2 percent, compared with an increase of 2.5 percent. Purchases of nondurable goods increased 0.6 percent, compared with an increase of less than 0.1 percent. Purchases of services decreased 0.1 percent, in contrast to an increase of 0.2 percent.

PCE price index — The price index for PCE increased 0.2 percent in November, compared with an increase of 0.3 percent in October. The PCE price index, excluding food and energy, increased less than 0.1 percent, compared with an increase of 0.2 percent.