This noisy data series came in nearly at expectations. The good news for 4Q 2014 GDP is that expenditures were very strong.
The market looks at current values (not real inflation adjusted) and was expecting:.
The monthly fluctuations are confusing. Looking at the inflation adjusted 3 month trend rate of growth, income trend is up and expenditures is unchanged.
Real Disposable Personal Income is up 2.9% year-over-year, and real personal expenditures is up 2.8% year-over-year (table 10) – well below last quarters GDP growth rate.
this data is very noisy and as usual includes moderate backward revision (detailed below) – this month the changes were moderate.
The third estimate of 3Q2014 GDP indicated the economy was growing at 5.0% (quarter-over-quarter compounded). Expenditures are counted in GDP, and income is ignored as GDP measures the spending side of the economy. However, over periods of time – income and expenditure must grow at the same rate. Usually this differential signals a future slowdown of consumer spending growth.
The savings rate continues to be low historically, and declined this month.
The inflation adjusted income and consumption are “chained”, and headline GDP is inflation adjusted. This means the impact to GDP is best understood by looking at the chained numbers. Econintersect believes year-over-year trends are very revealing in understanding economic dynamics.
Per capita inflation adjusted expenditure has exceeded the pre-recession peak.
Seasonally and Inflation Adjusted Expenditure Per Capita
Per capita inflation adjusted income is above pre-recession levels.
Seasonally and Inflation Adjusted Income Per Capita
Backward revisions this month:
Estimates have been revised for July through October. Changes in personal income, in current-dollar and chained (2009) dollar DPI, and in current-dollar and chained (2009) dollar PCE for September and October — revised and as published in last month's release — are shown below
