US Consumer Taps Out: Personal Savings Rate Drops To Lowest Since December 2009

Tyler Durden's picture

The August Personal Income and Spending report is out and while there were some modest surprises in the data, namely a drop in Personal Income of -0.1%, on expectations of an increase of 0.1% (and an adverse revision for July data from 0.3% to 0.1%) - the first drop in two years, while Personal Spending was in line with expectations at 0.2% (previous revised from 0.8% to 0.7%), the biggest news of the day is that the US consumer is getting tapped out, with spending coming entirely from savings: the savings rate dropped from a revised 4.8% (previously 5.0%), to 4.5%, the lowest since December 2009.

August income components are not pretty, in fact they were pretty damn ugly:

Private wage and salary disbursements decreased $12.2 billion in August, in contrast to an increase of $23.8 billion in July.  Goods-producing industries' payrolls decreased $1.3 billion, in contrast to an increase of $6.3 billion; manufacturing payrolls decreased $2.9 billion, in contrast to an increase of $5.8 billion. Services-producing industries' payrolls decreased $10.9 billion, in contrast to an increase of $17.5 billion. Government wage and salary disbursements increased $0.4 billion, in contrast to a decrease of $1.8 billion.

And what is even worse is that based on other personal income, the primary source of "income" was and continues to be the squatter's rent where not paying one's mortgage effectively translates into income:

Rental income of persons increased $8.3 billion in August, compared with an increase of $8.1 billion in July. Personal income receipts on assets (personal interest income plus personal dividend income) decreased $5.7 billion, compared with a decrease of $5.8 billion.

Lastly, the government was not very generous last month: the result - a tapping of consumer bank accounts.

Personal current transfer receipts decreased $7.1 billion in August, compared with a decrease of $10.7 billion in July.  Government social benefits to persons for Medicaid decreased $10.5 billion, compared with a decrease of $13.6 billion.

And Goldman's take:

Weak Income and Spending

BOTTOM LINE: Weak real income growth a negative for consumer spending outlook. Downward revisions to consumer spending a small negative for Q3 GDP.

KEY NUMBERS:
Personal income -0.1% (mom) for August vs. GS +0.1%, median forecast +0.1%.
Consumer spending +0.2% (mom) for August vs. GS +0.1%, median forecast +0.2%.
Core PCE deflator +0.15% (mom) for August vs. GS +0.1%, median forecast +0.2%.

MAIN POINTS:
1. Nominal personal income declined by 0.1% (month-over-month) in August, in contrast to consensus expectations for a small increase. Income from wages and salaries fell by 0.2%, the first decline since last November. Real disposable income-household incomes adjusted for taxes and the effect of price change-fell by 0.3%, and was up only 0.3% from a year earlier. Poor real income growth is a negative for the second half consumer spending outlook.

2. Nominal consumer spending increased by 0.2%, in line with consensus expectations. In real terms consumer spending was unchanged after a 0.4% increase in July. Real consumer spending growth was also revised down for June and July, and the result overall was a slight negative for Q3 GDP growth.

3. The core PCE deflator increased by 0.15% in August, or 1.6% from a year earlier. The overall PCE price index increased by 0.2% or 1.7% year-over-year.