Although the jobless claims number today could be influenced by the commencement of holiday season (after all, it takes a Scrooge to fire folks around Thanksgiving/Christmas), and the housing sector is in the midst of its final leg down in prices amidst a flood of shadow inventory finally coming to market and an end to the pent-up demand coming off the recession period, today’s Personal Income and Outlays number give us reason to feel thankful.
We wrote last week on the unfortunate conflation of rate of retail sales, with reversals in the rate consumer credit repayment (or, of late, consumer re-borrowing) over the past year. September’s continuation of the slow-down trend in consumer income growth (actually a contraction) lagging consumer spending growth was very concerning. But in October – some real relief: Income growth at 0.5% outpacing the 0.4% growth in spending!
So, although we still question October’s jobs numbers (as we wrote earlier this month, because of the statistical impact of the birth/death model on the Establishment Survey, and the Household Survey showing a decline in the number of people employed, despite the job creation), and say what you will about holiday season jobless claims, the Income and Outlays numbers were like the marshmallows on tomorrow’s sweet potatoes.
Core PCE, of course, continues to confirm our projection of sustained, moderate deflationary pressure – which will be seen throughout the holiday period. Even headline CPI inflation (with the dollar turning positive now) will be nil to negative, and core will drift downward below zero in the coming months – despite slightly improved consumer incomes in October. It is very clear to us that there is, and will continue to be, no pricing pressure with anemic growth in final demand still overwhelmed by a monstrous excess supply of global labour and capacity. CPI would – in fact – have been negative for some time without relentless inflation in healthcare and, to a lesser extent, education…both of which sectors are completely out of control in terms of being anything resembling efficient markets.
But let’s be thankful for the good sign today – have a very happy Thanksgiving Day.
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