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U.S. Personal Income - The Next Interest Rate Change May Be In The Summer

Tim Worstall profile picture
Tim Worstall


  • We have the latest figures for U.S. personal income, expenditure and the deflator.
  • These show that, with some bumps along the way, the economy continues to grow reasonably.
  • The latest best estimate of another interest rate cut is, therefore, in the summer.

Growth and interest rate cuts

Whether we get another interest rate cut at all depends upon the idea that growth in the economy falters at some point. The general view is that growth will slow, for economic expansions simply never do go on forever. We also don't expect some wild burst of inflation that pushes rates up.

So, the question becomes, well, when do we think there will be another change in interest rates from the Federal Reserve? A couple of months back, the betting was that it would be about now, in December. This prospect has receded, and the current suggestion is that interest rates will remain where they are now until the summer, barring any changes in circumstances.

The is supported by these latest figures for personal incomes, expenditures and the associated deflator.

Personal income

The three numbers here all come from the same Bureau of Economic Analysis report:

Personal income increased $3.3 billion (less than 0.1 percent) in October according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) decreased $12.6 billion (-0.1 percent) and personal consumption expenditures (PCE) increased $39.7 billion (0.3 percent).

Real DPI
decreased 0.3 percent in October and Real PCE increased 0.1 percent. The PCE price index increased 0.2 percent. Excluding food and energy, the PCE price index increased 0.1 percent.

It's worth unpicking that presented altogether like that, it might not make much sense.

Personal income

Personal income

(Personal income from Moody's Analytics)

As we can see, total personal income moved barely at all. But within those numbers, there is something more interesting. Labour incomes from wages rose 0.4%, which is the sort of amount we like to see. It shows the workers are gaining from the economy, which is rather the point of our having an economy in the first place. It was proprietors' (i.e., small business) and asset incomes

This article was written by

Tim Worstall profile picture
Tim Worstall is a wholesaler of rare earth metals and one of the global experts in the metal scandium. He is also a Fellow at the Adam Smith Inst in London and an writer for a number of media outlets, including The Times (London), Telegraph, The Register and even, very occasionally indeed, for the WSJ. This account is linked with that of Mohamad Machine-Chian: https://seekingalpha.com/user/52914142/comments

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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