Personal Income, Consumer Sentiment, Gas Prices

U.S. personal income increased 0.2 percent in September. Consumer sentiment continued its improvement during the second half of October. Last week, the average U.S. price for a gallon of gas dropped below $3.

U.S. personal income increased $22.7 billion, or 0.2 percent in September, according to the Bureau of Economic Analysis on Friday. During the same period, personal consumption expenditures (PCE) – which is people out spending their personal income — decreased $19 billion, or also 0.2 percent.

On the other hand, real PCE — PCE adjusted to remove price changes – decreased 0.2 percent in September, in contrast to an increase of 0.5 percent in August, the BEA reported. The bureau’s price index for PCE increased 0.1 percent in September, compared with a decrease of 0.1 percent in August. The PCE price index, excluding food and energy, increased 0.1 percent in September, the same as in August.

Personal saving — income less personal outlays — was $732.2 billion in September, compared with $702 billion in August, the BEA noted. The personal saving rate, which is personal saving as a percentage of disposable personal income, was 5.6 percent in September, compared with 5.4 percent in August. During much of the 2000s, personal savings was much lower, even negative at times, but since the recession has been higher.

Consumer Sentiment Ends October on High Note 

Consumer sentiment continued its improvement during the second half of October, according to the University of Michigan on Friday, coming in at 86.9 at the end of the month, up from 86.4 at mid-month and 84.6 at the end of September. The index is at its highest level since July 2007.

The expectations component of the index drove the gain by rising three points to 78.4, which is the best reading for that particular metric since October 2012. The current conditions component didn’t move any during the second half of October, but still remains at 98.9, almost as high as it’s been in the post-recession period.

The University of Michigan bases its numbers on questioning 500 U.S. households each month on their own financial conditions and attitudes about the broader economy. Consumer sentiment is an indirect measure of economic strength, since consumers with better feelings about the direction of the economy are likely to spend more, an especially important consideration ahead of the holiday season.

Gas Prices End October Way Down 

Perhaps one reason consumers are more optimistic now is the pronounced slide in gas prices. Last week, for the first time since late 2010, the average U.S. price for a gallon of gas dropped below $3, coming in at $2.987 on Sunday, according to AAA. A week earlier, the average was $3.05, and a month again, it was $3.328.

Wall Street ended October up again on Friday, with the Dow Jones Industrial Average gaining 195.1 points, or 1.13 percent. The S&P 500 advanced 1.17 percent and the Nasdaq was up 1.41 percent.