The Bureau of Economic Analysis has just told us that personal income went up nicely in October, but that people didn’t spend the extra money:
Personal income increased $68.1 billion, or 0.4 percent, and disposable personal income (DPI) increased $56.8 billion, or 0.4 percent, in October, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $15.2 billion, or 0.1 percent. In September, personal income increased $27.4 billion, or 0.2 percent, DPI increased $27.0 billion, or 0.2 percent, and PCE increased $9.5 billion, or 0.1 percent, based on revised estimates.
Real DPI increased 0.4 percent in October, compared with an increase of 0.3 percent in September. Real PCE increased 0.1 percent in October, the same increase as in September.
Additionally, as seen in the second of the two tables which follow, spending increases in previous months were were revised significantly downward, despite income increases getting revised upward:
Here’s the underlying data for this year, which shows a 2.1 perent increase through 10 months:
Since it came out only a day after GDP, I wouldn’t know whether today’s downward revisions were or weren’t considered in yesterday’s GDP report. If they weren’t, the above data, which shows PCE increasing by just 0.6 percent in the third quarter (2.4 percent annualized), would seem to dictate the need to take what the government reported yesterday — a 3.0 percent annualized increase in PCE — down significantly. If they were, yesterday’s result doesn’t seem defensible.
(UPDATE, Nov. 27: The Atlanta Fed reduced its fourth-quarter forceast from 2.3 percent to 1.8 percent based on today’s news. So if the government didn’t bake today’s income/outlays news into yesterday’s GDP report, it seems that the third quarter will be revised down in late December by a more than minor amount.)
In general — It’s more money, but barely more consumption. I say, with support found here, that the explanation is higher debt payments, which aren’t part of consumption, but certainly work to empty consumers’ pockets.