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Economy in Brief

U.S. Income & Outlays Firm, Wage Revisions Upward
by Tom Moeller May 27, 2005

Personal income in April rose 0.7% following a 0.5% increase in March. Consensus expectations had been for a 0.6% rise. Disposable personal income increased 0.5% (6.0% y/y) following two months of 0.4% gain. When adjusted for price inflation take home pay rose 0.1% (3.3% y/y) following a slight decline in March.

Wages & salaries were notably strong and growth during the prior year was upwardly revised. A 0.7% April increase (7.6% y/y) doubled the prior months' increases and year to year growth through March was revised up to 7.6% from 5.8% y/y estimated earlier. Wages in service producing industries surged 0.9% and y/y growth rose to 9.2% versus the 6.4% pace previously estimated. Even factory sector wages showed life and rose 0.5% (6.4% y/y) in April. Year to year growth through March now stands at 7.0%, up from the 5.8% y/y gain estimated last month.

Offsetting some of this strength have been declines in rental income (-14.1% y/y).

Personal consumption increased 0.6% following an upwardly revised 0.9% increase in March. Consensus expectations had been for a 0.8% gain. Durable goods spending rose 0.7% (9.4% y/y) and spending on services rose 0.3% (5.6% y/y) following earlier gains that were revised down.

Nondurables spending surged 1.1% (8.3% y/y) as spending on gasoline & oil jumped 5.5% (25.9% y/y). Spending on clothing recovered 1.5% (5.9% y/y) following the prior month's 2.1% drop.

The PCE chain price index rose 0.4% but less food & energy the 0.1% m/m increase was the slimmest of the year.

Disposition of Personal Income April March Y/Y 2004 2003 2002
Personal Income 0.7% 0.5% 7.0% 5.8% 3.2% 1.8%
Personal Consumption 0.6% 0.9% 6.9% 6.0% 5.2% 4.6%
Savings Rate 0.4% 0.5% 1.5% 1.3% 1.4% 2.0%
PCE Chain Price Index 0.4% 0.5% 2.7% 2.2% 1.9% 1.4%
  Less food & energy 0.1% 0.3% 1.6% 1.5% 1.3% 1.8%
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