Personal Income and Consumption Expenditures

Source: Department of Commerce

Frequency: Monthly

Availability: Three to four weeks following the reported month

Possible Impact on Interest Rates: Larger-than-expected monthly increase or increasing trend is considered inflationary, causing bond prices to drop and yields and interest rates to rise.

This report covers both personal income and consumption expenditures. Personal income includes all sources of earnings--wages (which represents about 58% of the total), interest and dividends, proprietor's income, and other miscellaneous labor income. Consumption is important, because it represents over one-half of the gross domestic product (GDP).

Personal income and savings data, which is also covered by the report, provide economists insight into future spending (consumption) trends. For example, a dip in the savings rate might suggest consumers are using that means to finance purchases, a spending situation that typically is not sustainable. The expectation would be for spending to decline in future months.

The bond market prefers a sluggish report. Strong gains in personal income and consumption suggest rapid economic growth, causing investors concern the Federal Reserve will be forced to tighten monetary policy by increasing interest rates.