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Economy in Brief

U.S. Personal Income Up As Expected, Core Price Inflation Tame
by Tom Moeller September 29, 2006

Personal income matched expectations and rose 0.3% last month after a downwardly revised 0.5% gain during July.

Personal consumption rose a slightly less than expected 0.1%, held back held back by a 6.5% m/m drop (-4.7% y/y) in unit vehicle sales. So far in 3Q real spending is up at a 2.7% annual rate versus last quarter, slightly better than the 2Q rate of gain.

The PCE chain price index rose an expected 0.2%, less than the 0.3% gain during the prior month. Less food & energy prices also rose an expected 0.2% (2.5% y/y), the same as this year's monthly average and the same as the monthly average increase during 2005.

Wage & salary disbursements ticked up 0.1% (7.7% y/y) following two months of 0.6% increase. Wages in the private service-producing industries were unchanged (8.5% y/y) and the average monthly increase this year has been 0.8%, double last year's monthly average. Factory sector wages fell 0.1% (+6.5% y/y) and the average monthly increase this year has been 0.8% versus a 0.2% average during 2005.

Interest income fell by 0.2% (+8.4% y/y) for the second consecutive month but dividend income surged for the third month by 1.0% (11.4% y/y).

Disposable personal income increased 0.4% (8.8% y/y). Personal taxes fell slightly (+14.0% y/y).

Adjusted for price inflation, disposable personal income increased 0.3% (5.3% y/y), up slightly from this year's 0.2% average and up from the 0.1% average monthly decline last year. Real disposable income per capita rose 0.1% (4.4% y/y).

The personal savings rate was a slightly less negative -0.5% last month and so far in 2006 has averaged -0.5%, the same as last year. Should the Decline in the Personal Saving Rate Be a Cause for Concern? from the Federal Reserve Bank of Kansas City is available here.

Borrowing by U.S. Households from the Federal Reserve Bank of Richmond can be found here.

Middle Class in Turmoil: Economic Risks Up Sharply for Most Families Since 2001 from the Center for American Progress is available here.

Disposition of Personal Income August July Y/Y 2005 2004 2003
Personal Income 0.3% 0.5% 9.4% 5.2% 6.2% 3.2%
Personal Consumption 0.1% 0.8% 5.0% 6.5% 6.6% 4.8%
Savings Rate -0.5% -0.7% -3.0% (Aug. '05) -0.4% 2.0% 2.1%
PCE Chain Price Index 0.2% 0.3% 3.2% 2.9% 2.6% 2.0%
  Less food & energy 0.2% 0.1% 2.5% 2.1% 2.0% 1.4%
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