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Consumption Boost From Savings Rate Decline Fading

  • Personal spending and income growth was as expected in nominal terms in October, with spending rising 0.22% M/M (cons 0.2) and incomes 0.25% M/M (cons 0.2).
  • Goods spending (-0.2%) mirrored the weakness seen in retail sales, with services (+0.4%) more resilient.
  • Real spending was more mixed relative to consensus, rising 0.17% M/M (cons 0.1) but after a downward revised 0.34% M/M (prior rounded to 0.4). There was a less clear cut split between goods and services here, goods rising 0.1% vs services 0.2% M/M.
  • It leaves overall real consumption running at a still strong 3.0% annualized on a 3M/3M basis (following 3.6% in Q3), although the latest trend is softer at 2.1% annualized on a three-month basis.
  • Back in nominal terms, disposable income increased 0.3% M/M after 0.4% M/M. It’s helped see a stabilization in the saving ratio at 3.9% (from 3.8% in Sep) after a sharp run down in Q3 helped fuel strong consumption growth, which in turn had reversed the build in savings rates in Q2 that came along with the consumption soft patch (when it increased 0.8% annualized).

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