The stock market seems pretty pleased with the consumer spending numbers that came out today. Personal consumption expenditures (PCE) were up a robust 1.1 percent in November. (The Commerce Department’s report can be read here.)
However, inflation as measured by the PCE price index jumped by a very disturbing 0.6 percent. That meant real personal consumption expenditures were only up 0.5 percent.
Inflation also bit into disposable income. Real disposable income growth, that is, growth in inflation-adjusted after tax income, was negative for the second month in a row – down by 0.2 percent in October and falling by 0.3 percent in November. Barring a snap back in December, this is a sharp change of direction after solid growth in real disposable income over three of the last four quarters.
Unfortunately, those income numbers released today are perhaps not all that jolly.