US DATA: Goods Pullback Weighs On Consumption But Still A Solid Q3

The delayed personal income and outlays report for September saw a decline in goods spending offset more-of-the-same for services consumption. It still left real spending up a solid 2.7% in Q3 whilst the savings rate saw a second month at its lowest since December. 

• Real personal spending was softer than expected in September even if the extent of its miss was exaggerated by rounding, both with the 0.04% M/M in Sep (cons 0.1) and the downward revision to 0.25% from an initially reported 0.35% (which rounded to 0.2 from 0.4).
• We estimated that retail sale volumes slipped a heavy -0.4% M/M in last week’s September report and indeed, real goods spending fell -0.4% M/M in today’s’ release after a notably downward revised 0.3% (initial 0.7).
• Real services consumption maintained recent trends meanwhile, at 0.25% M/M after an average 0.22% M/M through Jun-Aug.
• Looking more broadly, the quarterly profile of overall consumption saw another solid quarter with 2.7% annualized in Q3 after 2.5% in Q2 having recovered from the 0.6% in Q1. It averaged 3.4% annualized in 2024.
• Y/Y consumption growth is a little weaker however, easing from 2.6% to 2.1% Y/Y for its softest since Jan 2024.
• Reverting to the nominal details, personal income increased 0.4% M/M as expected, with disposable income a little softer at 0.3% M/M. Combined with personal spending of 0.3% M/M and the household savings ratio held steady at 4.7%, consolidating a drop to its lowest since Dec 2024 after underwhelming income dynamics in August.