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Economy in Brief

U.S. Personal Income Light, Price Inflation Firmed
by Tom Moeller September 1, 2005

Personal income rose just 0.3% in July following an unrevised 0.5% increase in June. Consensus expectations had been for a 0.5% increase. Combined with a similarly modest gain in May, the three-month growth in income slowed to 4.4% (AR) from 6.9% in January.

The Trimmed-Mean PCE Inflation rate reflects new research from the Federal Reserve Bank of Dallas. The measure indicates that core price inflation may be running one-half of a percentage faster than what is being indicated by other measures. It is now available in USECON and the Dallas Fed's research is available here.

The PCE chain price index, from the US Bureau of Economic Analysis, rose 0.3% following a June dip. Gasoline prices rose 6.1% after two months of decline and rose another 8.6% in August. Less food & energy, prices ticked just 0.1% higher following no change in June.

Wages & salaries rose 0.5% (6.9% y/y), the strongest monthly increase since April. Factory sector wages rose 0.5% (5.7% y/y) and prior month's figures were revised up. Sector wages rose 0.6% (8.0% y/y), the strongest since April.

Disposable personal income increased 0.3% (5.1% y/y) after a 0.5% June increase. Adjusted for price inflation take home pay was unchanged (2.5% y/y), the first month of no growth since March.

Personal consumption expenditures surged another 1.0% owing to a 10.6% jump in sales of light vehicles. That followed a 7.5% spike in June vehicle sales. Spending on durables overall rose 4.7% (9.4% y/y) and nondurables spending rose 0.6% (8.0% y/y). Services spending increased 0.4% (5.7% y/y).

The personal savings rate went negative for the first time since 2001 although 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.

Understanding the Term Structure of Interest Rates from the Federal Reserve Bank of St. Louis is available here.

Disposition of Personal Income July June Y/Y 2004 2003 2002
Personal Income 0.3% 0.5% 6.3% 5.9% 3.2% 1.8%
Personal Consumption 1.0% 1.0% 6.9% 6.5% 4.9% 4.2%
Savings Rate -0.6% 0.0% 1.1% 1.7% 2.1% 2.4%
PCE Chain Price Index 0.3% -0.0% 2.5% 2.6% 1.9% 1.4%
  Less food & energy 0.1% 0.0% 1.8% 2.0% 1.3% 1.8%
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