October Sees Expected 0.2% Increase in Core PCE; Income and Spending Remain Stable

In October, the US PCE index saw a slight increase, suggesting steady inflation alongside moderate growth in both income and spending.  

Highlights

• PCE Index indicates a slight increase, indicating consistent inflation.
• Personal income and spending in the United States experience a moderate upturn.
• The savings rate mirrors a careful consumer mindset.

The PCE price index, a significant gauge of inflation, demonstrated a marginal uptick of less than 0.1 percent in October. Excluding food and energy prices, the core PCE price index displayed a 0.2 percent increase. Annually, the PCE price index surged by 3.0 percent, with service prices witnessing a 4.4 percent climb, indicating a balanced inflationary environment.

The U.S. economy experienced consistent growth in personal income and consumer spending in October 2023. The Bureau of Economic Analysis reported a $57.1 billion upsurge in personal income, a 0.2 percent rise, slightly trailing September 2023's 0.4 percent growth. This growth primarily stemmed from increased earnings from assets and compensation.

Disposable personal income (DPI), denoting personal income after taxes, also saw a 0.3 percent increase, reaching $63.4 billion. This elevation in DPI suggests that consumers had more income for spending or saving. Correspondingly, personal consumption expenditures (PCE) rose by $41.2 billion or 0.2 percent. Notably, the surge in consumer spending was chiefly seen in services, particularly in healthcare, housing, utilities, and international travel, outweighing a decline in spending on goods like motor vehicles and energy products.

The personal saving rate in October stood at 3.8 percent, with total savings amounting to $768.6 billion. This rate indicates a cautious savings approach among consumers. Real PCE, factoring in inflation adjustments, also saw a 0.2 percent increase, driven by increased spending in both goods and services sectors.

The economic indicators for October 2023 underscore a U.S. economy witnessing stable income and expenditure growth, despite fluctuating trends in goods and services spending. The subdued inflation rate presents a nuanced perspective of the economic landscape, with attention now turning to the Federal Reserve's forthcoming policy decisions. Additionally, revised estimates from April to September 2023 offer a clearer insight into compensation, tax, and social insurance contributions, crucial for evaluating the economy's trajectory.