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

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Bureau of Economic Analysis data showed that personal income increased $0.4 billion (less than 0.1 percent) and disposable personal income (DPI) increased $0.8 billion (less than 0.1 percent) in October. Concurrently, personal consumption expenditures (PCE) decreased $20.2 billion (0.2 percent). Real (inflation-adjusted) DPI decreased 0.1 percent while real PCE decreased 0.3 percent.
 

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Although aggregate personal income continues to set new highs on a nominal basis, in inflation-adjusted terms it is still slightly below the May 2008 peak -- and declining slowly. Taking population growth into account makes the picture even gloomier; per-capita real personal income has recouped only about 54percent of the prior peak-to-trough loss. Moreover, it appears real income metrics have rolled over and are declining again. The purchasing power consumers “feel” with their pocketbooks is most closely related to the per-capita RPI line.
 

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Household wealth increased by nearly $1.8 trillion in 3Q2012 -- a jump of 8.6 percent during the past year -- but remains nearly 4 percent below the 3Q2007 peak. Taking price inflation into account, household wealth is 14 percent below the peak.
 

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The Census Bureau reported that consumers decreased spending on retail goods during October (by 0.3 percent, seasonally adjusted). On an unadjusted basis, sales rose 3.5 percent between September and October.
 

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Total consumer debt outstanding rose by a seasonally adjusted $14.2 billion (6.2 percent annualized) in October. Revolving (mostly credit card) debt increased by $3.4 billion (4.7 percent annualized), while non-revolving debt (mainly student and auto loans) increased by $10.8 billion (6.9 percent annualized). Federal student loans comprised more than three-fourths of the increase in non-revolving debt, and over two-thirds of the increase in total debt outstanding.
 

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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.