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Economy in Brief

U.S. Personal Income & Spending Firm Again
by Tom Moeller March 1, 2006

The 0.7% rise in personal income was slightly stronger than Consensus expectations for a 0.6% advance during January and followed an upwardly revised 0.5% increase in December.

Wage & salary disbursements nearly doubled the prior month's pace and rose 0.7% (5.1% y/y). The December rise was upwardly revised to 0.4%. Factory sector wages rose 0.2% (3.0% y/y) and service sector wages jumped 0.8% (5.4% y/y) after the upwardly revised 0.6% December increase.

Disposable personal income rose 0.5% (5.4% y/y) for the third month in the last four but adjusted for a stiff 0.5% gain in prices, disposable income eked out only a negligible m/m rise (2.2% y/y).

The 0.9% rise in personal consumption expenditures was a bit short of expectations for a 1.0% gain due to a light 0.1% increase in services spending. That gain was restrained by an 8.8% m/m decline (+11.0% y/y) in spending on electricity & gas services due to warm temperatures. Spending on motor vehicles & parts rose 0.5% (1.6% y/y) but spending on furniture & household equipment boomed 1.9% (6.7% y/y). Spending on clothing & shoes also was quite strong and posted a 2.3% advance (6.9% y/y) and spending on food jumped for the second month in the last three, in January by 1.6% (8.9% y/y).

The PCE chain price index was quite firm and rose 0.5%, the first increase after two months of decline. Gasoline & oil prices jumped 6.2% (26.4% y/y) though in February the retail price of gasoline backed off to an average $2.28 per gallon from $2.32 during January. During the latest week gasoline was $2.25 per gallon. Less food & energy, prices increased 0.2% following an unrevised 0.1% December rise. Nondurables prices surged 1.0% due to the rise in gasoline but food prices also rose a firm 0.5% (2.5% y/y). Durables prices rose 0.1% (-1.3% y/y), held back by another decline in furniture & household equipment prices (-4.4% y/y). Clothing & shoes prices rose by -0.1% (-1.3% y/y).

The personal savings rate was negative for the ninth month in the last ten.

Recent Changes in U.S. Family Finances: Evidence from the 2001 and 2004 Survey of Consumer Finances from the Federal Reserve Board is available here.

Disposition of Personal Income Jan Dec Y/Y 2005 2004 2003
Personal Income 0.7% 0.5% 5.8% 5.5% 5.9% 3.2%
Personal Consumption 0.9% 0.7% 6.8% 6.5% 6.5% 4.9%
Savings Rate -0.7% -0.4% 0.7% (Jan '05) -0.4% 1.7% 2.1%
PCE Chain Price Index 0.5% -0.0% 3.1% 2.8% 2.6% 1.9%
  Less food & energy 0.2% 0.1% 1.8% 2.0% 2.0% 1.3%
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