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Economy in Brief

U.S. Personal Income Firm, Prices Tame
by Tom Moeller June 30, 2006

Personal income rose 0.4% last month following an upwardly revised 0.5% gain during April. The May increase doubled Consensus expectations for a 0.2% rise.

The PCE chain price index rose an expected 0.4% and reflected a 4.6% (30.5% y/y) jump in gasoline & oil prices. Less food & energy the 0.2% (2.1% y/y) rise in the chain price index also was expected. Prices for clothing & shoes fell 0.1% (-0.6% y/y) and furniture & household equipment prices continued their long standing decline (-5.0% y/y).

A strong 1.2% (7.4% y/y) gain in personal interest income and a 0.9% (11.1% y/y) increase in dividend income paced last month's rise in income.

Wage & salary disbursements were unchanged (4.8% y/y) after a downwardly revised 0.8% spike during April. Private sector wages were unchanged (5.1% y/y) as factory sector wages fell 0.1% (+2.4% y/y). Service producing industries wages also fell 0.1% (+5.4% y/y) after a 1.1% April jump.

Government transfer payments for health insurance & disability surged 1.0% (12.1% y/y) reflecting Medicare drug coverage.

Disposable personal income rose 0.3% (4.7% y/y) after an upwardly revised 0.6% April jump. Personal taxes rose 0.5% (10.6% y/y).

Adjusted for price inflation, disposable personal income fell slightly (+1.4% y/y) marking the third m/m decline this year. A 0.1% decline in real disposable income per capita (+0.5% y/y) left the measure down 0.4% year to date.

Personal consumption matched Consensus expectations for a 0.4% rise but adjusted for price inflation spending rose just 0.1% (3.3% y/y). Real spending on durables dropped 0.6% (+4.7% y/y) reflecting lower sales of motor vehicle & parts (-1.9% y/y) while real spending on furniture & household equipment rose 0.3% (12.7% y/y).

The personal savings rate was again 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 May April Y/Y 2005 2004 2003
Personal Income 0.4% 0.7% 5.4% 5.4% 5.9% 3.2%
Personal Consumption 0.4% 0.7% 6.7% 6.5% 6.5% 4.9%
Savings Rate -1.7% -1.6% 0.0% (May '05) -0.5% 1.7% 2.1%
PCE Chain Price Index 0.4% 0.5% 3.3% 2.8% 2.6% 1.9%
  Less food & energy 0.2% 0.2% 2.1% 2.0% 2.0% 1.3%
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