October 2020 Income and OutlaysSubmitted by Atlas Indicators Investment Advisors on December 7th, 2020
Income and outlays data provide an important and frequent look into the state of our economy. Of course, income is, for the most part, a necessary condition for spending. Outlays, in the report on personal consumption expenditures (PCE) represents over two-thirds of our nation’s output. Both were mixed in October 2020 according to the Bureau of Economic Analysis.
After rising a downwardly revised 0.7 percent (originally 0.9 percent) in September, income gave back all of the gain, recording a 0.7 percent drop to start the fourth quarter. This decline, however, was fully accounted for by further cuts to coronavirus-related programs. In other words, all four of the primary income sources rose in the period. Wages and salaries gained 0.7 percent. Proprietors’ income jumped 1.2 percent. Collected rents rose 0.5 percent, and personal income on assets (i.e., interest and dividends) increased 0.7 percent.
Spending improved for a sixth consecutive period. Outlays for services gained 0.7 percent. Purchases of goods were mixed though; consumption of durable goods gained 0.6 percent while falling 0.3 percent for nondurable wares.
Inflation data reversed course some after several months of increases. The PCE price index as well as the core PCE price index were both unchanged, and their year-over-year comparisons fell marginally. The Federal Reserve uses the trend of the core PCE price index as its preferred inflation measure. Currently, they are willing to let its trend outpace their typical target of 2.0 percent; unfortunately for them it fell to 1.4 percent from 1.6 percent, so they’re likely to be more accommodative before beginning a new regime of tighter monetary conditions.
Consumption is up along with incomes derived from assets and work. Together with a lower-than-target inflation rate, the prospect for further economic improvements seems good. Our economy still has a distance to go before recapturing output levels reached this time last year but is headed in the right direction.