Personal income in the United States (money earned from wages and salaries) decreased by 0.1 percent on the month in October, according to data released by the Bureau of Economic Analysis and the Commerce Department on Friday. Disposable personal income (what’s left after taxes) decreased by 0.2 percent on the month. September’s data were not revised from gains of 0.5 percent in both categories.
Economists were expecting personal income to climb 0.3 percent on the month, a deceleration from September’s strong gain but still more optimistic than the actual data. The decline in personal income was the first since January and appears to reflect income lost as a result of the 16-day partial government shutdown.
The decline in disposable personal income can also be attributed to an increase in personal current taxes, which increased $12.8 billion in October compared to a $2.3 billion increase in September. Total disposable personal income declined by $23.6 billion for October compared to a $62.1 billion increase in the previous month.
The consumption side of the report was also relatively soft, but not surprisingly so. Personal consumption expenditures increased 0.3 percent in October compared to a 0.2 percent increase in September. This is an increase of $32.1 billion for October compared to an increase of $30.9 billion for September.
The personal savings rate (disposable income minus outlays) was 4.8 percent in October, down from 5.2 percent in September.
The price index for personal consumption expenditures, which is the Federal Reserve’s preferred measure of inflation, decreased “less than 0.1 percent in October,” according to the BEA. This follows a 0.1 percent increase in September. The core index, which excludes food and energy prices, increased 0.1 percent in October.
On the year, core consumer expenditure prices are up just 1.1 percent, while the headline rate is up only 0.7 percent. Both rates are well below the Fed’s target inflation rate of 2 percent. Soft price pressure continues to suggest that the U.S. economy is suffering from low demand, which is a problem that many critics fear ongoing quantitative easing can not solve.
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