Yes, you’ve got to hand it to our hero Joe Sixpack. He always comes through in a pinch.
The pessimists thought he’d materially slow his spending and throw the economy into a tailspin. But Joe confounds the experts time and time again, and last month was no exception.
Personal income increased by 0.3% last month, the Bureau of Economic Analysis reported today. But Joe and his counterparts across the nation, true to form, saw fit to raise spending by 0.5% in November. Even more impressive is the fact that consumer purchases accelerated for durable goods, the most volatile and, for reasons we discussed yesterday, the most cyclically sensitive slice of the public’s spending habits.
The volatility of late seems to favor higher spending for durable goods. As the chart below illustrates, personal consumption expenditures (PCEs) have rebounded handsomely from August’s steep decline.
August’s 1.5% drop in durable-goods spending appeared to foreshadow trouble ahead for the economy, all the more so as worries mounted over the unfolding correction in the housing market. Several months later, however, fears that a correction in the real estate market would convince Joe to hoard his income look unfounded. Or was the summer fear just premature?