Personal Income and Outlays

The Personal Income and Outlays Report (sometimes called the Personal Consumption Report) is issued monthly by the Bureau of Economic Analysis, 4-5 weeks after month's end. It is an important economic indicator to help gauge the strength of the consumer sector in the U.S. The report contains two sections: the first section deals with personal income, while the other deals with personal outlays.

Personal income is a measure of income received from all sources, such as wages and salaries, fringe benefits, rental income, dividends and interest, and transfer payments. A change in income level is an important economic indicator, since the level of income individuals receive dictates how much they can save or spend.

Personal consumption expenditures (PCE) is a measure of how much people are spending. They consist of the actual and imputed expenditures of households; the measure includes data pertaining to durables, non-durables and services.

The Bureau of Economic Analysis also computes the Personal Consumption Expenditure Price Index (PCEPI), which is an important inflation indicator.

Personal Income and Outlays and Gold

Personal income and outlays provide insights into the strength of the consumer sector in the economy. As consumer spending accounts for more than two-thirds of the GDP, the report gives investors a good gauge of the overall strength of the economy (at least measured by the GDP). Therefore, PCE exerts impact on gold through changes in the expectations of economic growth and, thus, the Fed’s policy. Indeed, as one can see in the chart below, there is a very strong correlation between PCE and GDP growth. Not surprising, given that the former indicator is actually used to calculate the latter. Thus, a strong report is usually negative for the price of gold, while a weak report should be bullish for the gold market.

Chart 1: Personal Consumption Expenditures (red line, left axis, annual percent change), GDP (green line, left axis, annual percent change) and the price of gold (yellow line, right axis, London P.M. fix) from 1971 to 2015.

Personal Consumption Expenditures, GDP and the price of gold

However, as the Personal Income and Outlays report comes out later than other indicators, such as retail sales, it attracts less interest. This is also probably why Rohan Christie David et al. in the paper “Do Macroeconomic News Releases Affect Gold and Silver Prices” found that this report has no detectable effects on gold futures. The PCEPI is the Fed’s preferred measure of inflation, but it is released after the PPI and CPI, hence its release provokes a weaker reaction in the gold market.

We encourage you to learn more about gold – not only how it is affected by personal income and outlays, but also how to successfully use gold as an investment and how to profitably trade it. A great way to start is to sign up for our gold newsletter today. It's free and if you don't like it, you can easily unsubscribe.