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  Personal Income Increased 0.4% in September, Personal Consumption Rose 0.8%
Posted Under: Data Watch • PIC

 
Implications: A good report on the consumer today shows the plow horse economy continues to push through the mud and clay. Consumer spending grew a healthy 0.8% in September, the biggest monthly gain since February. “Real” (inflation-adjusted) personal consumption was up 0.4% and is 2.1% higher than a year ago. Respectable, but far from spectacular. Income gains were also solid in September, with disposable (after-tax) income up 0.4%, the highest monthly increase since March. Real disposable income is up 1.9% from a year ago, which is enough to keep pushing consumer spending higher. The lion’s share of the income gains in September was due to worker compensation. Government transfers also added about a quarter of the gain, rising 0.5% in September, but this was after a decline in transfers in August. Government transfers are up 3.3% in the past year, while private-sector wages and salaries are up 4.6%. In other words, transfers are now holding down the growth rate of income. One factor that will help maintain spending growth in the year ahead is that households’ financial obligations – recurring payments like mortgages, rent, car loans/leases, as well as other debt service – are now the smallest share of income since 1984. This allows consumers to stretch their income gains further. On the inflation front, overall consumption prices were up 0.4% and the core PCE, which excludes food and energy, was up 0.1% in September. Overall prices and core prices are both up 1.7% in the past year, versus the Federal Reserve’s target of 2%. This is awfully close for a central bank running a very loose monetary policy. Expect higher inflation in the year ahead.

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Posted on Monday, October 29, 2012 @ 9:43 AM • Post Link Share: 
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These posts were prepared by First Trust Advisors L. P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
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