October Personal Income Off 0.1%; Spending Gains 0.3%

WASHINGTON — October Personal Income data showed continued spending despite a drop in income that stemmed from slower wage growth, lower interest and dividends, and a retrenchment in farm income. Some of the slowing in income probably stemmed from the government shutdown.

Personal Income posted -0.1% in its biggest -- and only -- drop since January's -4.4%. Personal Consumption Expenditures posted +0.3%, and core PCE prices +0.1% for another weak inflation rate of +1.1% over the year.

October spending again surged on durables and nondurables, and services lagged. But it is key that spending continued. Real PCE stands about +1.8% SAAR from Q3, suggesting continued modest overall economic growth.

In income, private wages were up $8.9 billion after a $17.1 billion gain in September. Both goods and services wages slowed, and the Commerce Department said although there was no impact on government wages the impact on private industry could not be separated.

A key element of the drop in income, however, stemmed from farm proprietors' income at -$22.4 billion, This came after a $19.5 billion gain in September that was boosted by $10.1 billion by a USDA legal settlement. Even after accounting for the special factor, farm income dropped, probably because price supports in the FY14 budget year have not yet been approved.

Receipts on assets were down $4.1 billion, with dividends -$5.3 billion but interest slightly higher. We are unclear if corporations conserved cash because of the government shutdown.

Rents, other business income, and transfers rose.

The savings rate was 4.8%, only slightly below the elevated pace of the summer.

To the extent the government impact has been reversed, we would look for some rebound in income ahead. This should support spending.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER