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Economy in Brief

U.S. Income, Spending & Prices Firm in March
by Tom Moeller May 1, 2006

Personal income increased 0.8% during March, double the Consensus expectation for a 0.4% rise and followed an unrevised 0.3% increase in February. The increase was the largest for any month since last September.

A 5.3% (16.4% y/y) spike in health insurance benefits due to prescription drug benefits under the Medicare health-care program boosted transfer payments by 3.3% (9.3% y/y).

Wage & salary disbursements rose another 0.4% (5.0% y/y) lifted by a 0.5% (5.6% y/y) rise in private service sector wages. Factory wages rose 0.3% (2.4% y/y), the firmest gain since last October, while government sector wages grew 0.3% (3.3% y/y).

Disposable personal income jumped 0.8% (5.5% y/y) while personal taxes rose 0.8% (9.3% y/y). Adjusted for price inflation disposable income rose 0.5% (2.6% y/y) and real disposable income per capita jumped 0.4% (1.6% y/y).

Personal consumption also was firm and increased 0.6% versus a Consensus expectation for a 0.4% rise. Adjusted for price inflation, spending rose 0.2% (3.4% y/y). Real spending on furniture & household equipment increased 0.9% (13.0% y/y) and "other" durable goods spending rose 1.8% (8.5% y/y). Spending on clothing & shoes fell for the second consecutive month and drooped 0.9% (+7.8% y/y) following several strong monthly gains between October and January. Spending on gasoline & oil fell 2.9% (-0.2% y/y and real services spending rose 0.4% (3.0% y/y).

The PCE chain price index rose 0.4% lifted by a 3.5% (16.5% y/y) jump in gasoline & oil prices. Prices for clothing & shoes surged 1.2% (-1.8% y/y), furniture & household equipment prices fell another 0.3% (-4.5% y/y) but motor vehicle & parts prices rose 0.2% (0.8% 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 a negative 0.3%.

Last week's testimony, Outlook for the U.S. Economy, by Federal Reserve Bank Chairman Ben S. Bernanke can be found here.

Disposition of Personal Income Mar Feb Y/Y 2005 2004 2003
Personal Income 0.8% 0.3% 6.0% 5.5% 5.9% 3.2%
Personal Consumption 0.6% 0.2% 6.4% 6.5% 6.5% 4.9%
Savings Rate -0.3% -0.6% 0.4% (Mar '05) -0.4% 1.7% 2.1%
PCE Chain Price Index 0.4% 0.1% 2.9% 2.8% 2.6% 1.9%
  Less food & energy 0.3% 0.1% 2.0% 2.0% 2.0% 1.3%
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