Personal and Disposable Income Rose in September
Personal income increased $53.0 billion, or 0.5 percent, and disposable personal income (DPI) increased $49.3 billion, or 0.5 percent, in September, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $11.6 billion, or 0.1 percent. In August, personal income increased $47.2 billion, or 0.4 percent, DPI increased $46.4 billion, or 0.5 percent, and PCE increased $15.3 billion, or 0.2 percent, based on revised estimates.
Personal outlays also increased in September, but by less than the increase in August.
Personal outlays — PCE, personal interest payments, and personal current transfer payments increased $15.3 billion in September, compared with an increase of $19.1 billion in August.
What does this mean? Well, growth personal outlays for the year peaked in July of this year and have declined in August and September. Consumer spending is one of the primary drivers of growth, so a decline here would likely translate into lower growth, and if the decline continues and even becomes negative future growth would likely decline as well. So what will we see in the next few months, a continuation of the decline or a leveling off or rebound? That depends, at least to some extent, on what the Fed does. Higher interest rates will likely mean further declines in the housing market as well as higher interest rates for those with adjustable rate mortgages. This would likely mean more “belt tightening” by consumers. Lower rates could help mitigate this effect and either slow the decline or even see a return to growth in consumer spending.