Economic data

Oct Personal Income rose .2% m/o/m, .1% more than expected. Spending rose by .7%, .2% above forecasts but comes after a .6% drop in Sept and 1.3% rise in Aug as the CARS program created lumpiness in the data. Sept income was revised up by .2% and spending lower by .1%. Because headline PCE inflation rose .3%, REAL Income fell .1% and REAL spending rose .4%. As a result of the jump in spending relative to the modest rise in income, the savings rate fell to 4.4% from 4.6%. Y/o/Y, the PCE deflator is up .2%, positive for the first time since April. Personal Income is now down 1% y/o/y but Disposable Income (income less taxes) is up 2.4% y/o/y and lends evidence that a reduction in taxes paid is helping to lift the overall savings rate in addition to consumers spending less relative to their income. Net-net, while spending #’s looked good, the sustainability comes down to income growth which still remains punk but with hoped for improvement in ’10.

Initial Jobless Claims totaled 466k, well below expectations of 500k and its at the lowest level since Sept ’08, the week before Lehman and down from 501k last week. Continuing Claims fell by 190k which measures up to 26 weeks of benefits. Past this, Emergency Unemployment Compensation rose by 16k but Extended Benefits fell by 34k. Overall, the data clearly states that the level of firings continue to moderate, and rather sharply on the week, but there is not enough information within today’s data to see whether the level of hiring has picked up as the amount of those receiving benefits past 26 weeks still remains high and now some can get claims up to 99 weeks. With that said, it certainly is a nice thing to see initial claims fall below 500k and we can only hope that the path to hiring from a long stretch of firings is becoming shorter.

Oct Durable Goods unexpectedly fell by .6% and 1.3% ex transports. The estimate was for gains of .5% and .7% BUT Sept was revised up, twice the initial reading, putting the headline # over the two mo’s about in line but leaving the ex transport reading still below estimates. Non defense capital goods ex aircraft, the key cap ex data point, fell 2.9% but follows a 2.6% rise in Sept. Following 3 months of gains, orders of vehicles/parts fell .1%. Declines in computers/electronics and machinery orders weighed on the number too. Shipments, which get directly plugged into GDP, fell .2%. The inventory/shipments ratio was unchanged at 1.75, the lowest since Oct. Net-net, the data remains lumpy as over the past 6 mo’s orders have been up, down, up, down, up, down. This is not typical of post recession recoveries which have seen V bounces and provides further evidence that comparison’s to post WWII recoveries may not apply this time.