Incomes Grow Faster for Third Straight Month

 According to the Bureau of Economic Analysis, real personal income excluding government transfers in September 2012 was $9.526 billion (seasonally adjusted at an annual rate). While incomes have not returned to their peak level last seen in March 2008, they continue to rebound from the lows reached after the financial collapse. Incomes in September 2012 were 2.2% higher than they were in September 2011. This is the fifth consecutive month of month-over-month growth at a rate faster than 2%. While the month-over-month rate of growth has been accelerating, it is still slightly below the historical average of 2.9%. On an annual basis, the growth rate in real person incomes has accelerated each of the last two months. Based on the recent trend in incomes, the annual rate of change should continue to accelerate its rate of growth.

Real personal income is an important leading indicator for durable goods manufacturers and the suppliers to those manufacturers. In terms of the economic cycle, incomes are one the earliest pieces of economic data. And, incomes are one of the best leading indicators for consumer durable goods spending. Typically, incomes lead real consumer durable goods spending by 6-12 months. Currently, the annual rate of change in incomes is in a period of accelerating growth. This means we are likely to see faster growth in real consumer durable goods spending for the next 6-12 months. Ultimately, this is a positive sign for the durable goods manufacturing industry because spending leads industrial production which leads capital equipment and tooling sales.