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PCE Deflator At An All Time High While Savings Decrease

personal savings
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EDITOR'S NOTE: Personal income was expected to drop slightly in September while spending rose, but while spending rose as excepted, the income drop was much worse than predicted (-0.3% MoM vs. -1.0% MoM). Zero Hedge reports that “This 'over-spend' sent the savings rate plunging down to 7.5% from 9.2%, back to pre-COVID levels.” The overall level of savings right now in the U.S. is down to $1.336 trillion, which is the lowest level since January 2020. The piece also notes that “the Fed's favorite inflation indicator” is still around a 30-year-high. “The PCE Deflator rose 4.4% YoY, above August's +4.2% and Core PCE Deflator rose 3.6% YoY, the same as August (but very slightly less than the +3.7% exp) - both at their highest level since 1991.”

Americans' income was expected to drop modestly (-0.3% MoM) in September and, of course, spending rise (+0.6% MoM) but incomes actually fell significantly more than expected, dropping 1.0% MoM (while spending rose 0.6% MoM as expected).

Photo: Zero Hedge

On the income side, wages for private workers dropped from 10.8% to 1.7%, the lowest since March 2021, while, wages for government workers rose to 7.2% from 6.8%.

wages and salaries, savings

Photo: Zero Hedge

One item of significant note is that government transfer payments accounted for $3.9TN of personal income, leaving ex-transfers income at $16.6 tn. That means 19% of all income is transfer payments...

Photo: Zero Hedge

This 'over-spend' sent the savings rate plunging down to 7.5% from 9.2%, back to pre-COVID levels...

personal savings rate

Photo: Zero Hedge

The absolute personal savings currently is just $1.336 trillion, the lowest since Jan 2020...

personal savings

Photo: Zero Hedge

However, the most important aspect of today's data is The Fed's favorite inflation indicator which remains near 30-year-highs. The headline PCE Deflator rose 4.4% YoY, above August's +4.2% and Core PCE Deflator rose 3.6% YoY, the same as August (but very slightly less than the +3.7% exp) - both at their highest level since 1991...

Photo: Zero Hedge

Source: Bloomberg

Looking less and less transitory by the week.

Originally posted on Zero Hedge.

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