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Core PCE Rose 0.2% in October as Expected; Income, Spending Stable

By:
James Hyerczyk

October saw the U.S. PCE index rise slightly, indicating stable inflation alongside modest growth in income and spending.

US PCE, Income, Spending

Highlights

  • PCE Index shows minor rise, signaling stable inflation.
  • Personal income and spending in U.S. increase modestly.
  • Savings rate reflects cautious consumer approach.

Inflation and PCE Price Index

The PCE price index, a key measure of inflation, showed only a marginal increase of less than 0.1 percent in October. When food and energy prices were excluded, the core PCE price index saw a 0.2 percent rise. Annually, the PCE price index escalated by 3.0 percent, with service prices climbing by 4.4 percent, indicating a balanced inflation scenario.

U.S. Economy Sees Steady Growth in Income and Spending

October 2023 marked a period of steady economic growth in the United States, with a modest increase in personal income and consumer spending. The Bureau of Economic Analysis reported a $57.1 billion increase in personal income, a 0.2 percent rise, slightly trailing the 0.4 percent growth of September 2023. This increment is largely due to increased earnings from assets and compensation.

Disposable Income and Consumer Expenditure

Disposable personal income (DPI), which is personal income after taxes, also saw a rise of 0.3 percent, amounting to $63.4 billion. This increase in DPI suggests that consumers had more income for spending or saving. Corresponding to this, personal consumption expenditures (PCE) went up by $41.2 billion or 0.2 percent. Notably, the increase in consumer spending was primarily focused on services, particularly in healthcare, housing, utilities, and international travel, overshadowing a decline in spending on goods like motor vehicles and energy products.

Savings and Spending Patterns

The personal saving rate in October was 3.8 percent, with savings totaling $768.6 billion. This rate reflects a conservative approach to savings among consumers. Real PCE, which accounts for inflation adjustments, also experienced a 0.2 percent increase, driven by heightened spending in both goods and services sectors.

Outlook and Adjusted Estimates

The October 2023 economic indicators highlight a U.S. economy witnessing stable growth in income and expenditure, despite the varying trends in goods and services spending. The subdued inflation rate offers a complex view of the economic environment, with the focus now shifting to the Federal Reserve’s future policy decisions. Additionally, revised estimates from April to September 2023 provide a clearer understanding of the compensation, tax, and social insurance contributions trends, crucial for assessing the economy’s direction.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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