Consumer Spending, Personal Income both up 0.1%, for November 2011

The Personal Income and Outlays report for November covers individual income, consumption and savings. Consumer spending increased 0.1% while disposable income had no change. Personal income increased 0.1% There are two things to garner from this month's numbers. Consumer spending is mute and wages, salaries declined. Additionally, that great Black Friday record sales hype is not materializing in the aggregate spending numbers to date, as we pointed out in the retail sales overview. The personal income & outlays report is seasonally adjusted.

Personal consumption expenditures are often called consumer spending and in real dollars, or adjusted for price increases, is up 0.2% for November. Real Personal Consumption Expenditures, or PCE, are about 70% of GDP, and a monthly 0.2% increase is mediocre for Q4 GDP growth implications. Real means chained to 2005 dollars, or adjusted for inflation and are the values which are part of GDP. Below is a graph of real PCE.



Consumer spending is not just smartphones, toys and Starbucks. Things like housing, healthcare, food, gas are part of consumer spending. Consumer spending for the majority is spending to pay basic living necessities. Graphed blow is the overall real PCE monthly percentage change.



Here's what people spent money on in November, adjusted for prices, or in real dollars. Health care, for example, is a service. Gasoline is a nondurable good.

Purchases of durable goods increased 1.1% in November, compared with an increase of 1.3% percent in October. Purchases of nondurable goods decreased 0.1%, in contrast to an increase of 0.2%. Purchases of services increased 0.1%, in contrast to a decrease of less than 0.1%.

Price indexes are used as divisors to adjust for inflation and price changes. The indexes are used to compute spending and income for an apples to apples, real dollar comparison to previous months and years. Economic statisticians use real dollars so one does not erroneously assume economic growth when it's really inflation. The PCE price index had no change for the month, but is up +2.5% for the year. Minus energy and food, the price index increased +0.1% and is also up +1.7% for the year. The energy price index decreased –1.6% for November and is up 13.1% for the year. Anyone at the pump knows there is finally relief on gas prices recently. The food price index decreased -0.1% for the month and is up +5.0% for the year. While the PCE price index represents inflation, it is different from CPI.

Personal income increased +0.1% in November and these numbers are the total for everybody in the United States who is reported and not part of the underground economy. Below is personal income, not adjusted for inflation, or price changes.



Real personal income, or personal income adjusted for inflation, via the PCE price index, was up +0.1% for November. Below is the graph of real personal income. While personal income is everybody, all income in the U.S., we can see it's below 2008 levels when adjusted for inflation.



Disposable income is what is left over after taxes. DPI (disposable income), flat lined from October to November. DPI adjusted for inflation (see the price indexes above), also was zero, or no change from the previous month. These numbers are aggregates, which includes income of the uber-rich, or the 1% of the population, as they are now called.



Below is real disposable income per capita. Per capita means evenly distributed per person and population increases every month. November mid-month the U.S. population was 313,520,000 and increased 208,000 from October.



Interesting reality check huh? It seems politically, any mention of the effects of population on aggregate data is a no no and dismissed. Disposable income, when spread across increased population growth and adjusted for inflation shows it's often worse news, which makes declines even more miserable. The numbers reported in the press headlines are aggregates, or the total, regardless of how many more people are in the country.

The monthly percentage change for wages and salaries was –0.1%, with total employee compensation, which includes wages, salaries, benefits, also decreasing –0.1%. Landlords made out like bandits, their income increased 2.1% in a month. Proprietor income dropped –0.3%. This is income from non-incorporated businesses, such as the self-employed. This is some of the worse news from this month's numbers.

Private wage and salary disbursements decreased $7.1 billion in November, in contrast to an increase of $37.2 billion in October. Goods-producing industries' payrolls decreased $6.7 billion, in contrast to an increase of $8.6 billion; manufacturing payrolls decreased $6.9 billion, in contrast to an increase of $6.8 billion. Services-producing industries' payrolls decreased $0.3 billion, in contrast to an increase of $28.5 billion. Government wage and salary disbursements increased $0.1 billion in November, the same increase as in October.

Below are wages and salaries for the past decade. Notice the dip and the more flat line than earlier in the decade. Bear in mind these are aggregate, or all wages and salaries, and not adjusted for inflation.



Below is personal income minus personal current transfer receipts. This graph shows how much personal income increased that wasn't funded by the government and is used as a recession indicator. Transfer receipts are payments from the government to individuals where no actual services (work) was performed. This includes social security, unemployment insurance, welfare, veterans benefits, Medicaid, Medicare and so on. This month, in chained 2005 dollars, real personal income minus transfer receipts increased +0.1% from last month. Notice real personal income minus transfer receipts is below pre-recession levels. In other words, real income, has not recovered and no surprise from the jobs crisis alone.



Personal savings is disposable income minus outlays, or consumption and not adjusted for inflation. The Personal Savings Rate was 3.5% in November.




Below is disposable personal income minus personal consumption expenditures monthly raw total changes.



Personal Outlays are PCE, personal interest payments, and personal current transfer payments. PCE is defined above by percentages is almost all of personal outlays. Personal interest payments are things like the interest you pay on your credit card. Personal transfer payments are defined as:

Payments consisting of transfer payments by persons to government and to the rest of the world. Payments to government include donations, fees, and fines paid to Federal, state, and local governments, formerly classified as "personal nontax payments."

In other words, personal transfer payments are nothing more than that speeding ticket you just got or how you just donated to this site. People often confuse transfer payments with transfer receipts, not the same thing.

To visualize more data from this report, consider playing around with more of the St. Louis Federal Reserve Fred graphs.

Here is October's report overview, not revised. The October revisions are as follows:

  • Real Consumer Spending: +0.2%
  • Disposable Income, Not real, current dollars: +0.2%

Just another thing to observe, the slope or rate of change of the spending graphs is much higher than income graphs. In other words, income isn't keeping up with spending.

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