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Economy in Brief

U.S. Personal Income Firm
by Tom Moeller June 28, 2004

Personal income rose the same 0.6% (+5.8% y/y) last month as in April. Consensus expectations had been for a 0.5% gain.

For the second month the upside surprise was slight. Wages & salaries, however, have been notably firm rising 0.7% (5.1% y/y) in May and 0.6% in April reflecting the recent improvement in jobs growth. Firm wage gains were logged across industries but service industries rose a notable 1.0% (5.8% y/y).

Personal disposable income rose 0.6% for the second consecutive month (6.4% y/y). After accounting for a 2.5% y/y rise in prices, real disposable income rose 3.8%, down some from the recent peaks in the 4-6% range.

Consumer spending surged 1.0% in May as unit light vehicle sales jumped 8.7% m/m. A 0.8% gain in PCE had been expected. Nondurable goods spending also rose a strong 1.2% (9.9% y/y) as gasoline prices jumped and services rose 0.7% (5.5% y/y).

The PCE chain price index rose 0.5% following an upwardly revised 0.2% April gain. Less food & energy, prices rose 0.2% (1.6% y/y) for the sixth month in the last eight.

The savings rate fell to 2.2% from the upwardly revised 2.6% in April.

Disposition of Personal Income May April Y/Y 2003 2002 2001
Personal Income 0.6% 0.6% 5.8% 3.3% 2.3% 3.4%
Personal Consumption 1.0% 0.2% 6.7% 5.0% 4.8% 4.5%
Savings Rate 2.2% 2.6% 2.4% 2.1% 2.3% 1.7%
PCE Chain Price Index 0.5% 0.2% 2.5% 1.8% 1.4% 2.0%
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