September 2012 Personal Income and Outlays, Retail Sales and Consumer Debt

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Bureau of Economic Analysis data showed that personal income increased $48.1 billion (0.4 percent) and disposable personal income (DPI) increased $43.0 billion (0.4 percent) in September. Concurrently, personal consumption expenditures (PCE) increased $87.9 billion (0.8 percent). Real (inflation-adjusted) DPI decreased less than 0.1 percent while real PCE increased 0.4 percent.
 

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Although aggregate personal income continues to set new highs on a nominal basis, in inflation-adjusted terms it is just on par with the May 2008 peak. Taking population growth into account makes the picture even gloomier; per-capita real personal income has recouped less than 60 percent of the prior peak-to-trough loss. Moreover, it appears real income metrics have stalled and may be rolling over again. The purchasing power consumers “feel” with their pocketbooks is most closely related to the per-capita RPI line.
 

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The Census Bureau reported that consumers increased spending on retail goods during September (by 1.1 percent, seasonally adjusted). Americans bought everything from back-to-school supplies to new autos to the latest version of the iPhone. Sales ostensibly advanced in every retail segment except department stores. We say “ostensibly” because seasonal adjustments appear to be entirely responsible for the uptick in sales. On an unadjusted basis, sales declined in every kind of business between August and September.
 

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Total consumer debt outstanding rose by a seasonally adjusted $11.4 billion (5.0 percent annualized) in September. Revolving (mostly credit card) debt increased by $2.9 billion (4.1 percent annualized), while non-revolving debt (mainly student and auto loans) increased by $14.3 billion (9.2 percent annualized). Federal student loans comprised more than two-thirds of the increase in non-revolving debt.
 

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The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.