With personal income and spending, though not on homes, both up and consumer confidence on the increase, the holiday season may be brighter than anticipated.
In figures released Wednesday by the Department of Commerce, income rose 0.5%, or $57.6 billion, in October, and disposable personal income rose 0.4%, or $48.3 billion. Personal consumption also was up 0.4%, or $44 billion, although that spending apparently was not on new homes. Sales of new single-family homes, according to data from the Department of Commerce, fell a hefty 8.1% from September’s numbers. However, the margin for error on that drop is 16.1%, so the actual state of new home sales will have to wait for more precise numbers.
Or perhaps the answer to the home sales drop is in savings. Personal savings increased in October; saving as a percentage of disposable personal income was 5.7% in October, up from 5.6% in September—not much of an increase, but an increase nonetheless.
According to Ian Shepherdson, chief U.S. economist for High Frequency Economics, real spending on utilities dropped 4.8% because of warmer-than-usual weather; however, that drop “was offset by stronger spending on goods, particularly cars and other durables.” Growth in income, he added, supported the October spending, but the wage and salary increase of 0.6%, the highest since May, “looks unsustainable to us.”
In other spending, the durable goods figures released Wednesday by the Department of Commerce indicated drops in new orders, shipments, defense and non-defense spending, and increases in unfilled orders and inventory. While the numbers disappointed—Shepherdson said that the consensus expected an increase of 0.1% rather than a decrease—he pointed out that the September numbers were revised upward, “so net the data for October are nothing like as soft as they appear.”
The Thomson Reuters/University of Michigan Survey of Consumer Sentiment was the real bleak spot in this chorus of gradually improving indications, even though it too showed an increase for November, standing at 71.6 compared with October’s 67.7. However, the survey characterizes consumers’ personal finance outlook for the future as “dismal,” with only 25% of households expecting their finances to show improvement in the year to come.
The survey also indicated that “[n]early twice as many consumers reported that their finances had worsened rather than improved during the past year, with one in three reporting declines in household income.” Richard Curtin, Survey of Consumers chief economist, said in a statement, “While consumers clearly believe that the recovery has gained some traction, most still think that the economic gains will be too small to improve their own job and income position anytime soon.”
Robert Dye, senior economist at PNC Economics Division, characterized the data in a report as “early positive signals of a transition to a self-sustaining expansion.”