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US Personal Income Nov: 0.4% (Exp 0.4%; Prev 0.5%),Personal Spending Nov: 0.6% (Exp 0.6%; R Prev 1.4%) - Nominal Gains Very Solid, Inflation Adjusted Not So Much - Neil's Summary

Dec. 23, 2021 10:36 AM ET
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Cbus Neil's Blog
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Seeking Alpha Analyst Since 2013

Managing Partner of Sethi Associates, Ltd., a family owned investment manager specializing in investments in real estate, public markets, and venture capital with a current focus on esports investments. You can view my LinkedIn profile here. https://www.linkedin.com/in/neil-sethi-31204051. Started the blog at the request of friends who wanted an easier way to follow my thoughts on the markets and economic data, and now I share the articles on Seeking Alpha. Feedback always welcome!

  • US Personal Income Nov: 0.4% (exp 0.4%; prev 0.5%)
  • − Personal Spending Nov: 0.6% (exp 0.6%; R prev 1.4%)
  • US PCE Core Deflator (M/M) Nov: 0.5% (exp 0.4%; R prev 0.5%)
  • − PCE Core Deflator (Y/Y) Nov: 4.7% (exp 4.5%; R prev 4.2%)

pi1121.pdf (bea.gov)

All changes m/m unless noted. I'll hit the highlights at the top then go into a little more detail on each component. h/t to @LizAnnSonders for many of the charts.

Personal spending headline - After a very strong October (+1.4% headline), personal spending decelerated in November coming in +0.6% headline (we'll get into inflation adjusted below). That was in line with expectations, and it matches the increase from September, but inflation adjusted it was the weakest read since July. Services drove the increase in spending.

Personal income headline - After falling in September as we hit the "cliff" of pandemic benefits expiring and bouncing back in October (+0.5%), personal income continued moving higher in November fueled by continued wage gains as well as the removal of the big drag from reduced government transfer payments up +0.4%.

PCE - Of course those are all nominal numbers, and inflation did continue to make a big difference. PCE prices increased 0.6%, down a tenth from October's 0.7% (which was revised up from +0.6%), but otherwise the highest reading in months. Y/y accelerated to 5.7% the highest since 1982. Both were above expectations, as were core prices (excluding food and energy) which were up +0.5% (same as October) and 4.7% y/y the highest since 1989. PCE core prices are the Fed's "preferred" inflation metric, which makes this an issue and will likely increase expectations for a March rate hike.

Adjusting for those PCE prices (i.e., "real") personal spending was flat and personal incomes were negative for a second month down -0.2% after falling -0.3% in October. Disposable (after-tax) personal income was also down -0.2% it's fourth consecutive monthly decline.

Personal savings - The savings rate fell further to 6.9% from 7.3% in October, now back to Dec 2017 levels.

I'll go through details of each piece independently. Overall, it would be a very solid report if price inflation didn't eat up all of the nominal gains. But that's the world we live in, so I'll have to say it's a mixed report given that. Hopefully inflation will start to moderate soon on a m/m basis which will allow real incomes and spending to move back into positive territory. I also would like to see the savings rates not decline much further if we can avoid it. Selected tables at the end.

Personal Income

Outside of a fall in proprietor's income which has been weak since August, all areas improved in November led by increases in gov't transfer payments (+0.8%) and employee compensation (+0.4%). This is the ninth straight month of gains for compensation (as well as for income on assets). Real (inflation adjusted) ex-transfer payments income was down -0.2% though after a flat read in October. Real disposable personal income is now flat y/y.

Consumer Spending

As noted above spending driven by services which increased +0.9% while goods spending was up only +0.1% as durable goods fell -0.6% (non-durables was up+0.5%). Spending has been up every month since February. In real terms, goods spending fell -0.8% m/m (first decrease since July) while services increased +0.5%. Real goods spending is up 7.9% y/y and services 7.1%.

From the report:

The increase in services was widespread, led by housing and utilities. Within goods, an increase in nondurable goods (mainly gasoline and other energy goods) was partly offset by a decrease in durable goods (led by recreational goods and vehicles as well as motor vehicles and parts).


On prices, the increase was broad based. Goods prices were up +0.9% a big number but actually down from +1.3% in October led by non-durables which were up +1.2%. Durables were up +0.4%. Services were up +0.5% accelerating from +0.4% (revised from +0.3%) in October. Food was up +0.7% down from 0.8% in October) and energy decelerated a little to a still huge +3.5% m/m gain (October was up +4.9%). Y/y goods prices are up 8.5%, services 4.2%, energy 34.0%, and food 5.6%.

At least energy prices should start to moderate in coming reports but that will be largely offset if inflation spreads to services as those make up a very large percentage of the component.

Table of m/m income and spending:


To see more content, including summaries of most major U.S. economic reports and my morning and nightly updates go to Cbus Neil's Blog Posts for more recent or Sethi Associates for the full history.

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