U.S. Core PCE Price Gain Cools in November; Real Spending Rise Picks Up

• Price index held back by steady goods costs and slower services price rise.
• Real spending growth concentrated in goods.
• Disposable income growth slows.

The PCE chain price index edged 0.1% higher in November, following unrevised gains of 0.2% in both of the prior two months. The y/y rise moved up to 2.4% after deceleration in the prior three months. The price index excluding food and energy also inched up 0.1% last month, after two months of 0.3% gain. The y/y rise held at 2.8% in November, up from a 2.7% low throughout Q3.

Durable goods prices held steady (-1.1% y/y) in November, after a 0.1% October uptick. Motor vehicle & prices jumped 0.7% (-1.4% y/y) following a 0.9% rise. Recreational product prices declined 0.6% (-1.4% y/y) last month, after declining in each of the prior three months, while home furnishings & appliance costs were unchanged (-1.4% y/y) as they were in October.

Prices of nondurable goods were unchanged both m/m and y/y last month after declines in each of the prior three months. Clothing prices rose 0.1% (0.9% y/y) after falling 1.4%. Food prices rose 0.2% (1.4% y/y) following no change and gasoline & oil prices rose 0.5% (-8.6% y/y) after a 1.0% decline.

Services prices increased 0.2% (3.8% y/y) in November, after rising 0.4% in the prior month. Housing & utility prices rose 0.2% (4.6% y/y) after 0.4% gains in the prior two months, and services prices excluding energy & healthcare increased 0.2% (4.2% y/y) in November after a 0.4% gain. Healthcare prices rose 0.2% (2.5% y/y) as did housing & utilities costs (4.6% y/y). Transportation prices declined 0.5% (+1.5% y/y) while hotel & restaurant prices strengthened 0.7% (3.5% y/y). Recreation services costs rose 0.3% (3.3% y/y) after a 0.6% rise.

**Personal consumption expenditures (PCE) **increased 0.4% (5.5% y/y) in November, after a 0.3% October rise, revised from 0.4%. A 0.5% increase had been expected in the Action Economics Forecast Survey. When adjusted for price changes, PCE increased 0.3% (2.9% y/y) last month, after edging 0.1% higher in October.

Real spending on durable goods strengthened 1.8% (5.7% y/y) in November, after a 0.2% October rise. Real spending on motor vehicles increased 2.4% (5.0% y/y), after easing 0.3% in October. Real outlays on furnishings & durable household equipment rose 0.6% (4.7% y/y) in November, following a 0.2% decline in September, while real spending on recreational goods & vehicles jumped 2.7% (7.7% y/y) last month, after a 0.4% rise in October. Spending on “other” durable goods eased 0.1% (4.5% y/y) after strengthening 1.3% in October.

Nondurable goods spending in real terms improved 0.2% (2.2% y/y) in November, after falling 0.2% during October. Real clothing and footwear purchases jumped 1.3% (2.4% y/y) last month, following a 0.9% gain (+0.6% y/y) in October. Real food & beverage purchases fell 0.3% (+1.2% y/y), after easing 0.1% in the prior month. Real outlays on gasoline & other energy products declined 0.6% (+0.4% y/y), after falling 0.5%. Real spending on “other” nondurable goods rose 0.4% (3.4% y/y) last month, following a 0.6% decline.

Real spending on services edged 0.1% higher (2.7% y/y) in November, following two months of 0.2% increase. Real spending on housing & utilities eased 0.1% (0.9% y/y) last month, after holding steady in October, while real healthcare spending rose 0.2% (5.3% y/y), after rising 0.3%. Real spending on food services & accommodations weakened 0.6% (-0.3% y/y) in November, and reversed the prior month’s rise. Real spending on financial services & insurance gained 0.4% (3.4% y/y) after a 0.1% uptick. Real spending on transportation services eased slightly (+2.1% y/y) in November, after a decline of 0.1% in October. Recreation spending strengthened 1.2% (2.1% y/y) after falling 0.5% in October. Spending on “other” services slipped 0.2% (+1.1% y/y) after rising 0.3% in the prior month.

Personal income rose 0.3% (5.3% y/y) in November, after a rise of 0.7% in October, revised from 0.6%. A 0.4% gain was expected. Wages & salaries rose 0.6% (5.8% y/y) last month, following a rise of 0.5% in October. Rental income improved 0.1% (5.2% y/y), after a 0.5% October rise. Proprietors’ income edged 0.1% higher (2.4% y/y), following a 0.4% gain in October. Income from assets eased 0.1% (+1.0% y/y), after strengthening 1.0%, and current transfer receipts slipped 0.1% (+8.7% y/y) in November, after rising 0.9% in October. Government social benefits eased 0.1% (+8.6% y/y) in November, after improving 1.0% in the prior month.

Disposable personal income increased 0.3% (5.1% y/y) in November, following a rise of 0.7% in October. After adjusting for price changes, disposable income improved 0.2% (2.6% y/y), after gaining 0.5% in October.

The personal saving rate slipped to 4.4% in November, after rising to 4.5% in October. The rate remained below a January high of 5.5%. Personal saving fell 1.7% (+0.2% y/y) in November, after rising 10.3% in October.

The personal income and consumption figures are available in Haver’s USECON database with detail in the USNA database. The Action Economics forecasts are in AS1REPNA.