The most recent data release from the Bureau of Economic Analysis (BEA) showed that personal income increased 0.3% in September. The pace of personal income growth slowed after reaching a 1% monthly gain in January 2023. Gains in personal income are largely driven by increases in wages and salaries.
With spending increasing faster than personal income, the September personal savings rate dipped to 3.4% from 4.0% in August. As inflation has almost eliminated compensation gains, people are dipping into savings to support spending, according to analysis from the National Association of Home Builders.
Real disposable income, income remaining after adjusted for taxes and inflation, dipped 0.1% in September. It was the third consecutive decrease since June 2022. On a year-over-year basis, real (inflation adjusted) disposable income rose 3.5%, after experiencing negative year-over-year growth in 2022.
Personal consumption expenditures (PCE) rose 0.7% in September after a 0.4% increase in August. Real spending, adjusted to remove inflation, increased 0.4% in September, with spending on goods rising 0.5% and on services up 0.3%.
