U.S. Personal Income Growth Continues, While Spending Picks Up Pace in November – Action Forex
Personal income grew 0.3% month-on-month (m/m) in November, a deceleration relative to October’s outsized 0.7% gain. Personal income is 5.3% higher than 12 months ago, well above the pace of inflation.
Accounting for inflation and taxes, real personal disposable income grew 0.2% m/m, slower than the 0.5% pace in the prior month.
Spending remained robust, increasing 0.4% on the month, and was up 5.5% from a year ago.
Stripping out inflation, spending volumes grew 0.3% – an acceleration relative to the 0.1% gain recorded in October. Spending on goods picked up steam (+0.7%), led by higher outlays on vehicles and parts and recreational goods, while spending on services was little changed (+0.1%).
Inflationary pressures eased off in November. The Fed’s preferred inflation metric, the core PCE price deflator, rose 0.1% m/m, less than the 0.3% m/m increase seen in October. Year-over-year, core PCE inflation was 2.8% in November, unchanged from the prior month.
With spending outpacing income growth, the personal savings rate edged lower in November, declining to 4.4% down from 4.5% in October.
Key Implications
Consumers kept their purse strings open last month, and it seems that many were on the lookout for new car. This could partially reflect the post-hurricane replacement demand. For the fourth quarter a whole, consumer spending looks to increase by 3%, only a small downshift from 3.5% pace seen in Q3. Looking at the year as whole, U.S. consumers are finishing 2024 in strong financial shape thanks to wealth gains in equity markets and continued job gains. As a result, spending growth outpaced income for much of this year (with October being a notable exception).
Looking ahead to next year, we expect consumer spending to moderate to a trend-like pace of 2% (forecast) as job growth continues to slow, while inflation remains elevated. Strong gains in household wealth represent an upside risk to our outlook as consumers could lean on it next year as job growth moderates.
