Disposable Income Up 2.5% in September

According to the Bureau of Economic Analysis, September real disposable income was $12,033 billion real dollars (seasonally adjusted at an annual rate). This is the second highest level of income ever (only December 2012, which was artificially inflated due to tax law changes, was higher). The month-over-month rate of change in September was 2.5%. This is the slowest rate of monthly growth since June but about average for 2014. TThe annual rate of change, now 1.4%, has grown at a faster rate every month in 2014. This is the fastest rate of annual growth in disposable income since September 2013. However, the rate of growth is still well below the historic average rate of growth in disposable income, which is 3.1%.

In the chart below, if the effects of the tax law changes are eliminated the annual rate of change in disposable income has been slowing down since the second half of 2011. The remainder of 2014 will indicate whether disposable income is breaking out of this decelerating growth trend or not.

Real disposable income is one of the earliest leading indicators for the following end markets: aerospace; construction materials; custom processors; electronics/computers/telecommunications equipment; food/beverage processing; forming/fabricating (non-auto); hardware; HVAC; industrial motors/hydraulics/mechanical components; machinery/equipment manufacturing; metalcutting job shops; oil/gas field/mining machinery; power generation; primary metals; and printing.