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Economy in Brief

U.S. Personal Income Gain Light
by Tom Moeller March 31, 2006

Personal income rose 0.3% during February, a gain that fell just short of Consensus expectations for a 0.4% increase though the firm 0.7% January advance was unrevised.

Wage & salary disbursements continued firm with a 0.4% (5.1% y/y) increase. Factory sector wages rose 0.2% (2.9% y/y) after an upwardly revised 0.3% January gain and the rise in service sector wages halved to 0.4% (5.4% y/y) after a 0.8% jump during January.

Wages adjusted for price inflation during the last twelve months rose 2.1%, a deceleration from the 2005 advance. Last year, real wage growth of 3.3% just outpaced the 2.7% gain in worker productivity.

Disposable personal income increased 0.2% (5.1% y/y) after an upwardly revised 0.6% January increase. Adjusted for price inflation disposable income rose 0.2% (2.2% y/y). Real disposable income per capita increased 0.1% (1.3% y/y).

Personal consumption rose 0.1%, a bit more than the Consensus expectation for no change. In real terms, a 2.1% (-4.6% y/y) drop in motor vehicles & parts held back the advance but spending on furniture & household equipment fell just 1.6% (+10.5% y/y) after a 4.4% January boom that was double the gain initially estimated. Spending on clothing & shoes gave back all of the downwardly revised January gain with a 1.1% (+4.1% y/y) decline. Real services spending rose 0.8% (3.0% y/y). Spending on household services & operation recovered 5.3% m/m as temperatures turned more normal.

The PCE chain price index was unchanged as gasoline & oil prices fell 0.9% (21.4% y/y) though in March the wholesale price of gasoline has surged. Prices for clothing & shoes dropped 1.0% (-2.2% y/y) during February and furniture & household equipment prices fell another 0.3% (-4.2% y/y).

Incentives and Prices for Motor Vehicles: What has been happening in recent years? is a Working Paper from the Federal Reserve Board and is available here.

The personal savings rate was negative for the tenth month in the last eleven.

Temptation and Self-Control: Some Evidence and Applications from the Federal Reserve Bank of Minneapolis can be found here.

Disposition of Personal Income Feb Jan Y/Y 2005 2004 2003
Personal Income 0.3% 0.7% 5.6% 5.5% 5.9% 3.2%
Personal Consumption 0.1% 0.8% 6.2% 6.5% 6.5% 4.9%
Savings Rate -0.5% -0.5% 0.5% (Feb '05) -0.4% 1.7% 2.1%
PCE Chain Price Index 0.0% 0.5% 2.9% 2.8% 2.6% 1.9%
  Less food & energy 0.1% 0.2% 1.8% 2.0% 2.0% 1.3%
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