19) Economic Indicators: Personal Income and Outlays
What It Is
The Personal Income and Outlays report is prepared by the Bureau of Economic Analysis. It is released every four to five weeks after the end of the month and thus covers information gathered in the previous month. This report gives an overview of the behavior of consumers in two perspectives: income and consumption.
There are two general categories found in the report. These are personal income and personal outlay.
Personal income refers to the wages, salaries, and earnings (such as from rentals, interests, and dividends) of consumers. Salaries and wages, though, make up the majority of personal income. The values are stated in dollars and changes are expressed in percentages. Personal income is sub-divided into different sectors, from government to services.
Personal income is essential in this report because it serves as a basis for future demand of both goods and services in the market. If disposable personal income is high, then it may mean a boom in businesses as people have more money to spend. On the other hand, savings rates go up during economic recession as people anticipate the worst in the coming months.
Personal outlays, on the other hand, can be defined loosely as spending or personal consumption. These cover the items or services that consumers spend on. Also included are interest payments on mortgages and transfer payments. Personal consumption, moreover, can be durables, services, and non-durables.
The report also presents different types of statistics: real personal income, DPI or disposable personal income, and personal savings rate. Personal income is per capita or per population. It is highly influenced by inflation. DPI is personal income after tax, while personal savings rate is the difference between DPI and personal outlay. It represents in percentage terms of DPI.
Personal Income and Outlays also covers results for each month of the current year and the annual results for the last three years.
One of the most significant indicators is the PCE, or the personal consumption expenditures. It covers a lot of consumer spending, from deductions to Social Insurance, credit card payments, and the purchase of retail items. It is a chain-weighted index, which means it is associated with other factors to yield a clearer picture of consumer behavior. PCE is also important because it forms part of the Index of Coincident Indicators and of GDP, or real gross domestic product.
PCE is very much related to Consumer Price Index or CPI. Except for the fact that the latter is released earlier than the former, both are utilized to determine present and future inflation.
How the Report Is Valuable
PCE comprises much of the GDP. Using it as an indicator can help investors come up with a more accurate prediction. The historical data included in the report and PCE provide better price indicators in the long run. Looking at savings rate, you can have a good idea of how much money people are willing to spend in the future.
Things to Watch Out For
It is released at the same time as the other reports, so it is not as shocking and even completely significant. However, it can still be relevant. Not all types of income are also covered. It doesn’t include capital gains from appreciated stock sale even if many investors are earning much from it over the last few years. It also doesn’t present a thorough breakdown in terms of industry or demography.
- 01) Economic Indicators
- 02) Economic Indicators: Beige Book
- 03) Economic Indicators: Business Outlook Survey
- 04) Economic Indicators: Consumer Confidence Index (CCI)
- 05) Economic Indicators: Consumer Credit Report
- 06) Economic Indicators: Consumer Price Index (CPI)
- 07) Economic Indicators: Durable Goods Report
- 08) Economic Indicators: Employee Cost Index
- 09) Economic Indicators: Employee Situation Report
- 10) Economic Indicators: Existing Home Sales
- 11) Economic Indicators: Factory Orders Report
- 12) Economic Indicators: Gross Domestic Product (GDP)
- 13) Economic Indicators: Housing Starts
- 14) Economic Indicators: Industrial Production
- 15) Economic Indicators: Jobless Claims Report
- 16) Economic Indicators: Money Supply
- 17) Economic Indicators: Mutual Fund Flows
- 18) Economic Indicators: Non-manufacturing Report
- 19) Economic Indicators: Personal Income and Outlays
- 20) Economic Indicators: Producer Price Index (PPI)
- 21) Economic Indicators: Productivity Report
- 22) Economic Indicators: Purchasing Managers Index (PMI)
- 23) Economic Indicators: Retail Sales Report
- 24) Economic Indicators: Trade Balance Report
- 25) Economic Indicators: Wholesale Trade Report