The US PCE report for October 2023 saw personal consumption rise $41.2bn/ 0.2%, less than the 0.5% rise In September’s reading. The reading’s rise was mainly attributed to a $53.1bn increase in spending on services which offset a $11.9bn decrease in spending on goods. The main driver of this increase in spending was healthcare (notably hospitals and nursing home services), housing and utilities (notably housing) and other services such as international travel. On the other hand, the decrease in goods spending was attributed to a drop in new vehicle purchases and spending on gasoline and other energy goods.
Personal income saw an increase of $57.1bn (0.2%) band disposable income (which is personal income – current taxes), increased by $63.4bn (0.3%) compared to a 0.4% increase last while the personal savings rate was at 3.8% which was higher than the 3.7% last month.
YoY PCE increased 3% for October while Core PCE saw a YoY increase of 3.5%. This suggests that the drop in PCE has largely been attributed to falling food and energy prices which saw a 2.4% rise and a 4.8% year-on-year drop respectively.
Thus, it is safe to assume that inflation concerns in the US are flatling. Although this is good, interest rates are still highly elevated which could suggest that some undue damage will be done to the economy which is becoming increasingly evident in the MFG and Jobless claims reports this week. Another interesting observation is that although the savings rate increased by 3.8% year on year, this comes after several falling readings since May which is surprising given the high interest rates. This in turn leads one to presume that the recent trend of falling savings rates is attributable to people trying to keep up with the cost of living which was once inflation and is now more likely interest payments.
Trends in both the personal savings rate and disposable income rate are going to be something I will be looking carefully at in the coming months as these will be tell-tale signs of what is really going on beneath the headlines…
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