The BEA’s report on Personal Income and Outlays for November was not exactly what the cheerleaders expected or the Fed Wants.

Income was flat, price pressures were nonexistent, and spending was weak.


The Econoday consensus estimates missed across the board. Moreover October was revised a bit lower, effectively making the numbers worse.


November may have been a cycle high for confidence but it actually proved a weak month for the consumer. Personal income was unchanged in November as the wages & salaries component dipped into the negative column at minus 0.1 percent. Consumer spending rose 0.2 percent and reflected specific weakness in vehicles. Not helped by the weakness in income, the consumer had to dip into savings during the month where the rate fell 2 tenths to 5.5 percent.

Price data are very flat, unchanged for both the PCE and PCE core (less food & energy) with the year-on-year rate at 1.4 percent for the PCE and at 1.6 percent for the core. And in a comparison that doesn’t point to accelerating inflation pressures, the year-on-year rate for the core fell 2 tenths to 1.6 percent..

Two months into the fourth quarter, consumer spending is running at a plus 2.0 percent annualized pace, well down from the 3.0 percent rate of the third-quarter (see GDP report earlier this morning).

But to put the report in context, the wages & salaries component had been showing outsized strength in recent months as had vehicle sales. So one month of weakness shouldn’t be a surprise. But the inflation readings are clearly a concern for Fed policy makers who want to see pressures building.

As typically the case,  Econoday views things in the best possible light.

Auto sales are overstated given the rise in inventories. Auto sales rate to drop further, incentives higher, or both. GM announced layoffs at five locations.

This report will take a couple a tick or more off GDP estimates for the fourth quarter.

The third quarter will be the highlight of the year,and it won’t last.

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Mike “Mish” Shedlock