What Is Personal Income and Outlays?
The Personal Income and Outlays report (also called the Personal Consumption Report) consists of a series of data groupings produced by the Bureau of Economic Analysis (BEA) that track consumer income and spending. Personal income is the dollar value of income from all sources by individuals in the U.S.; personal outlay is the dollar value of purchases of durable (consumer goods that are not purchased frequently), and non-durable goods and services by U.S. consumers. These data can give indications of consumer behavior, saving activity, and overall economic performance.
- Personal Income and Outlays is a monthly report issued by the Bureau of Economic Analysis, which depicts consumer earning, spending, and saving.
- Because consumer spending is an important indicator of the demand for businesses' products and represents a large share of the U.S.' gross domestic product (GDP), the Personal Income and Outlays report is closely watched.
- Changes in the amounts and ratios between income, spending, and saving can provide important indications of current and near-term future economic trends.
Understanding Personal Income And Outlays
As an economic indicator, the Personal Income and Outlays report helps to gauge the strength of the U.S. consumer sector. Because consumer spending equates to such a large portion of the country's Gross Domestic Product (GDP), being able to gauge trends in income and spending is extremely important to investors because it provides an indication about the overall aggregate demand. The report also helps investors decide which companies to invest in because they can analyze and track whether consumers are spending on durables, non-durables, or services.
The major components of the BEA's Personal Income and Outlays report are personal income, disposable personal income (income after taxes), and personal consumption expenditures. The difference between income and expenditures can be interpreted as a consumers' gross savings, which can be held as cash or invested. BEA also releases data which breaks these categories down even further into various types of income, such as wages, salaries, interest received, and veterans' benefits. Personal consumption expenditure (PCE) data is available for a vast array of various types of products and services of different types. All data sets are reported in current dollars and real (inflation-adjusted) dollars.
As income and spending increases, it is thought that equity markets should react positively because of an assumed resulting increase in corporate profits as consumer spending filters through the economy. However, increased consumer demand is also believed to lead to wage and price inflation, which could have a negative effect on bond markets. A larger-than-expected monthly increase in income and outlay can cause bond prices to drop—and yields and interest rates to rise—based on inflation expectations and investor concern that the Federal Reserve will tighten monetary policy in response.
A rise in spending without a proportionate rise in incline suggests a dip in the savings rate. This might mean that consumers are spending down savings to finance current purchases. This is a spending situation that typically reverses in future months and suggests that spending will decline in future months in order to rebuild savings. On the other hand, a rise in savings indicates either that consumers are saving up for future purchases or that they perceive an increase in economic uncertainty in the future and are increasing their liquidity preference.
In Sept. 2019, the BEA's Personal Income and Outlays report indicated that personal income increased by an estimated 0.3% or $50.2 billion for the month of September, disposable personal income (DPI) rose 0.3% or $55.7 billion and PCE were up 0.2% or $24.3 billion.