Travelling this week.
U.S. Personal Spending Outpaces Income
Individuals extended the recent buying trend and dipped into savings last month. Personal consumption expenditures increased 0.4% (4.6% y/y) during December following a 0.8% November rise, revised from 0.6%. A 0.4% improvement had been expected in the Action Economics Forecast Survey. During all of last year, spending increased 4.5%, the strongest gain since 2011.
Adjusted for price inflation, personal spending increased 0.3% (2.8% y/y) after a 0.5% gain. Real durable goods purchases strengthened 0.8% (7.3% y/y) after a 1.1% rise. Motor vehicle buying increased 1.0% (2.7% y/y) after a 1.3% decline. Real spending on home furnishings & appliances rose 0.9% (10.1% y/y) after three consecutive months of even stronger increase. (…) Real spending on services gained 0.3% (2.0% y/y), the same as in November. Real recreation spending increased 0.2% (1.5% y/y) after a 1.0% jump. Real health care outlays nudged 0.1% higher (2.5% y/y) following a 0.3% rise, while housing & utilities expenditures improved 0.5% (1.2% y/y), the strongest gain in nine months.
Personal income rose 0.4% (4.1% y/y) last month following an unrevised 0.3% November gain. A 0.3% rise had been expected. During all of last year income rose 3.1%. Wages & salaries rose 0.5% following a 0.4% increase. Growth from December-to-December rose to 4.9% from 0.8% in 2016.(…)
Disposable income gained 0.3% (3.9% y/y) for the third straight month. Adjusted for price changes, take-home pay improved 0.2% after m/m stability. The December-to-December increase of 2.1% was improved from roughly no change during 2016.
The personal savings rate declined to 2.4%, the lowest level since September 2005. Personal saving declined by 20.6% y/y.
The PCE chain-type price index improved 0.1% (1.7% y/y) after a 0.2% rise. Excluding food & energy, prices rose 0.2% (1.5% y/y) following a 0.1% gain. (…) Services prices improved 0.2% (2.3% y/y) for a second straight month.
In Q4’17:
- real DPI rose 0.4% (1.6% a.r.);
- real PCE rose 0.9% (+3.7% a.r.);
- Wages and Salaries rose 1.1% (4.5% a.r.)!
- Core PCE deflator rose 0.5% (2.0% a.r.).
Wages are clearly accelerating per this metric. They were up 4.9% YoY in December. The BLS data is nowhere near that!
- Will incomes rise sufficiently to justify the brisk consumer spending? Will it happen before higher interest rates make consumer debt much more expensive? (The Daily Shot)
Source: @GregDaco
U.S. Employment Costs Rise 0.6% Compensation for American workers grew at a slower pace in the fourth quarter, but picked up strongly for the year as a whole, signaling historically low unemployment might be starting to put upward pressure on wages and benefits.
The employment-cost index, a measure of wages and benefits for civilian workers, rose a seasonally adjusted 0.6% in October through December, the Labor Department said Wednesday, matching expectations of economists surveyed by The Wall Street Journal.
Wages and salaries, which account for 70% of total compensation, rose 0.5% from the prior quarter. Benefit costs—which include health coverage, retirement benefits and paid leave—advanced 0.5%.
The total index increased 2.6% over the past year, matching the largest annual increase since 2015, when compensation also increased at a 2.6% rate. Growth in the index hasn’t exceeded 2.6% since 2008.
Private workers saw compensation rise 0.5% in the fourth quarter, a slowdown from the previous quarter. Meanwhile, state and local government workers saw compensation pick up in the fourth quarter to a 0.8% increase. (…)
Other metrics have pointed to modest wage growth. Average hourly earnings for private-sector workers rose 2.5% in December from a year earlier, the Labor Department reported earlier. This is similar to the pace maintained over the past three years.
