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.
Highlights
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
Financing and incentives on autos provides a glimpse of the direction for auto sales. Volkswagen has resorted zero percent and it looks like Toyota has employed that on a limited number of models. This is going to be like a cold infecting all of the brands as cars stack up on the dealers lots. At some point the dealers will not take any more cars which is going to rapidly show up in the automakers bottom line.
Spot on reporting Mish.
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New vehicle sales will have (a lot of) competition in the coming years.
Edmund’s Q3 2016 used vehicle report –
” the recent level of lease volumes sets the stage for vast amounts of near-new inventory dominate the used car market for years to come.”
https://static.ed.edmunds-media.com/unversioned/img/car-news/data-center/2016/nov/used-car-report/used-car-report-q3.pdf
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“Income was flat, price pressures were nonexistent, and spending was weak.”
And in a few short days 2017 health insurance premium (increase) will loom over consumer spending.
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We all know that it’s coming, the disappointing part of it is that nobody is talking about the real news. Cnn took a trick from Fox this month… instead of reporting lies that seem to get called out within minutes, they just don’t report any real news. Hell, Lou Dobbs interviewed Sheriff Joe Arpaio on Friday, and not one word about Obama’s birth certificate fraud claims now proven and revealed the day before on a news conference in Phoenix. They found the source document and finally completed the investigation in spite of the cost and government inteference. As far as the Unaffordable Care Act is concerned, people forgot about it… That was reported weeks ago. But then again, they seem to know every facet of all sports events.
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Do you remember when Dobbs had an anti-illegal immigrant daily show over at CNN several years ago before he moved to FOX? It was a great show. Dobbs attacked illegal immigration from every credible angle and didn’t leave a single stone unturned. The illegal immigrant activists hated him.
Then Lou switched over to Fox and started to support ‘a path to citizenship’ for millions of criminal illegal aliens living in the US in concert w/ RINOS like McCain, Grahamnesty and Rubio – the former ‘Gang of Eight’ members who wanted to reward the criminal aliens for successfully breaking into the country and using taxpayer financed benefits. 🙂
I’m not surprised that Lou omitted any discussion w/Sheriff Arpaio about the recent developments from the Maricopa County Sheriff’s Office investigation on Obama’s fake birth certificate.
Keep your eye on the ball. There is really no practical difference between “fake news” and “omitted news”. At the end of the wash cycle it’s all the same.
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Health insurance premiums are counted in GDP somewhere so higher premiums will add to that component.
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We might have reached peak car.
The lowest inventory on GM was EV.
EV might help save the sector from stagnation.
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here we go. all you who don’t like war, thank you for voting/endorsing .
for trump. here come a large war. the bulk of the people are tapped out. less demand for goods no matter where they are made.
so time for a war to create demand.
trump isn’t smart enough to set this up. but he is narcissistic enough to be the front man. and once he delivers, tptb will send him down in flames like they did LBJ
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Here is an interesting article about UK interest rates that infers both PM May and PE Trump are NOT fans of the current historic low interest rates.
” MPs to examine ‘unintended consequences’ of low interest rates
22 December 2016
A group of influential MPs have launched an inquiry into whether the Bank of England’s interest rate policies have helped to pump up house prices and damaged the sustainability of savings incomes in the wake of the financial crisis.
The Treasury Select Committee will examine the effectiveness of monetary policy since 2008 in meeting its 2pc inflation target as well as its “unintended consequences”… […]..
The inquiry follows criticism by prime minister Theresa May of the Bank’s interest rate and quantitative easing policies that she claimed had penalised savers… […]…
Donald Trump, the US president-elect, has also criticised the Federal Reserve’s interest rate policies. ”
more at link
http://www.telegraph.co.uk/business/2016/12/22/mps-examine-unintended-consequences-low-interest-rates/
.
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Bank inflation continues to move Joe average backward.
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The true cost of “free” Obamacare accelerates the destruction of US standard of living.
Anyone who actually believed this fraud was a free lunch needs to go repeat kindergarten.
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