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Personal Income Soars in November, Q4 Still Looks Weak

Personal income jumped 0.6 percent in November--twice what economists forecast--improving $85.8 billion, while spending rose a hefty 0.4 percent, the ""Bureau of Economic Analysis"":http://bea.gov/newsreleases/national/pi/2012/pdf/pi1112.pdf (BEA) reported Friday. The growth in spending matched economists├â┬ó├óÔÇÜ┬¼├óÔÇ×┬ó forecasts.

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The jump in spending reversed a $6.6 billion decline in October but fell short of the $86.2 increase in consumption recorded in September. The growth in income was the strongest monthly change since February, when personal income rose $86.3 billion.

BEA had estimated superstorm Sandy reduced wages--about 51 percent of income--by $18 billion in October.

The report still suggests a weakened fourth quarter compared the third. Personal consumption expenditures rose a net $34.7 billion in the first two months of the fourth quarter compared with $77.7 billion in the first two months of the third quarter. Personal consumption spending accounts for more than 70 percent of gross domestic product (GDP).

The November report marked the second time since June in which income exceeded spending.

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About half the jump income came from growth in wages and salaries. Personal interest income--despite low savings rates--improved $20.0 billion for the second straight month. Government transfer payments increased $7.1 billion largely on the strength of Social Security payments, reflecting the calendar (since December 1 fell on a Saturday, December Social Security payments were made on November 30).

Unemployment insurance payments rose $1 billion, the first month-over-month increase since October 2011, due to the surge in unemployment insurance claims following Sandy.

Personal savings improved in terms of dollar amount, increasing $32.1 billion. The personal savings rate also increased, sliding to 3.6 percent from 3.4 percent in October.

Consumer spending on durable goods--often a sign of confidence since they are big ticket items paid for through borrowed funds--rose $32.5 billion, reversing a $14.0 billion drop in October. Spending on non-durable goods fell $24.9 billion after slipping $3.3 billion in October. Spending on services (including rents and mortgage payments) increased $33.6 billion.

Personal interest payments--excluding mortgage interest--increased $1.1 billion, the fifth consecutive month-to-month increase, reflecting an increased consumer reliance on borrowing.

Inflation (as measured by personal consumption expenditures) considered the Federal Reserve's favored gauge, was 1.4 percent, down from 1.7 percent in October. Core inflation--excluding food and energy--was 1.5 percent, down from 1.6 percent in October.

_Hear Mark Lieberman every Friday on P.O.T.U.S. radio, Sirius-XM 124, at 6:40 am and again at 9:40 eastern time._

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.
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