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Economy in Brief

U.S. Personal Income Gain Light, Wages Soared, Prices Up
by Tom Moeller May 26, 2006

Personal income rose 0.5% last month following a downwardly revised 0.5% gain during March. The latest compared to Consensus expectations for a 0.7% increase.

Wage & salary disbursements soared 0.9% (5.3% y/y) following an upwardly revised 0.5% March increase. Private sector wages jumped 1.0% (5.7% y/y) as strong gains were logged in manufacturing (0.7%, 2.8% y/y) and in service producing industries (1.1%, 6.1% y/y).

Government transfer payments for health insurance & disability rose 0.6% (11.4% y/y) and a March surge was revised down.

Disposable personal income increased 0.4% (4.7% y/y) but a revised 0.4% gain in March was half that initially reported. Personal taxes jumped 1.6% (10.7% y/y).

Adjusted for price inflation, disposable personal income fell 0.1% (+1.7% y/y) following a revised no change during March that was initially reported up 0.5%. Real disposable income per capita fell 0.2% (+0.8% y/y), the third m/m decline this year.

Personal consumption matched Consensus expectations for a 0.6% rise. Adjusted for price inflation, spending rose 0.1% (3.1% y/y) for the second consecutive month. Real spending on gasoline & oil jumped 1.7% (0.8% y/y) following two months of decline.

The PCE chain price index rose 0.5% boosted by an 8.7% (19.1% y/y) surge in gasoline & oil prices. Less food & energy the chain price index increased 0.2% (2.1% y/y), down from the 0.3% gain in March. Prices for clothing & shoes rose 0.4% (-0.7% y/y) but furniture & household equipment prices fell another 0.4% (-4.8% y/y).

The personal savings rate was a negative 1.6% in April and recent figures were revised more negative.

The Trend Growth Rate of Employment: Past, Present and Future from the Federal Reserve Bank of Kansas City is available here.

Disposition of Personal Income April Mar Y/Y 2005 2004 2003
Personal Income 0.5% 0.5% 5.4% 5.4% 5.9% 3.2%
Personal Consumption 0.6% 0.5% 6.2% 6.5% 6.5% 4.9%
Savings Rate -1.6% -1.4% -0.2% (April '05) -0.5% 1.7% 2.1%
PCE Chain Price Index 0.5% 0.4% 2.9% 2.8% 2.6% 1.9%
  Less food & energy 0.2% 0.3% 2.1% 2.0% 2.0% 1.3%
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