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Economy in Brief

June Growth in U.S. Personal Income Firm
by Tom Moeller August 2, 2005

June personal income rose 0.5% following an unrevised 0.2% gain in May. Consensus expectations had been for a 0.4% increase. The strength in the total's rise owed to a 2.0% (6.1% y/y) increase in proprietors' income.

Higher receipts from assets also lifted earnings last month as interest income rose 1.5% (4.3% y/y) and dividend income rose 0.8% (9.5% y/y).

Wages & salaries rose a modest 0.2% (7.4% y/y) following a slim 0.1% gain in May. Factory sector wages fell 0.2% (5.7% y/y) though service sector wages rebounded 0.3% (8.8% y/y) following no change the prior month.

Disposable personal income jumped 0.5% (5.3% y/y) following a 0.2% increase in May. Adjusted for price inflation take home pay rose 0.5% (2.9% y/y) though upward revisions to pricing lowered slightly recent y/y gains.

Matching Consensus expectations, personal consumption expenditures surged 0.8% on the strength of higher sales of light vehicles. Spending on durables overall reversed the May decline with a 2.9% (8.0% y/y) increase. Nondurables spending rose a moderate 0.7% (7.3% y/y) and spending on services increased 0.5% (6.2% y/y).

The personal savings rate fell to 0.0% though the household sector's net worth (from the Flow of Funds Accounts) has been rising, helped by a 16% increase in owners' equity in real estate.

The PCE chain price index fell slightly due to a 0.3% decline in gasoline prices which subsequently rose 6.2% in July. In August, gas prices are about equal to the prior month's average of $2.29. Less food & energy, prices also were unchanged as durable goods prices fell 0.4% (-0.5% y/y) and services prices increased a moderate 0.2% (2.9% y/y).

Closing the Gap from the Federal Reserve Bank of St. Louis is available here.

Disposition of Personal Income June May Y/Y 2004 2003 2002
Personal Income 0.5% 0.2% 6.6% 5.9% 3.2% 1.8%
Personal Consumption 0.8% -0.0% 6.7% 6.5% 4.9% 4.2%
Savings Rate 0.0% 0.4% 1.5% 1.7% 2.1% 2.4%
PCE Chain Price Index -0.0% 0.0% 2.2% 2.6% 1.9% 1.4%
  Less food & energy 0.0% 0.2% 1.9% 2.0% 1.3% 1.8%
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