Income Growth Strongest Since Oct. '16

The recent trend in real disposable income indicates that it is neutral, and perhaps moving positive, for future capital spending.

(Neutral) In November 2017, real disposable income was $12,833 billion. As is normally the case, real disposable income set an all-time high this month. Compared with one year ago, November real disposable income was up 1.9 percent. Therefore, November was the second straight month of accelerating growth. And, November’s rate of growth was the easily the fastest since October 2016. However, November’s rate of growth was still only 67 percent of the historic average rate of growth in real disposable income.

The annual rate of growth was unchanged at 0.8 percent. Basically, November 2017 was the first month the annual rate of growth did not decelerate since June 2016. So, perhaps disposable income growth it hitting a bottom and starting to turn positive.

Keep in mind that changes in real disposable income typically lead capital equipment consumption by almost 24 months.

Reports

World Machine Tool Survey

An independent annual survey that collects statistics from machine tool consuming and producing countries and compares them in real U.S. dollars.

Gardner Business Index

A diffusion index measuring month-to-month changes in activity at durable goods and discrete parts manufacturing facilities.

Capital Spending Survey

An annual survey that collects statistics regarding budgeted spending on machine tools, testing equipment, software and more that are then projected across the metalworking industry based on plant size.