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Economy in Brief

U.S. Personal Income Gain Light, Core Prices Firmer
by Tom Moeller November 30, 2006

Personal income for October rose a bit less than expectations with a 0.4% increase after an unrevised 0.5% September gain.

The disappointment in last month's income gain, however, was confined to a 3.9% (-8.7% y/y) decline in rental income and a slim 0.1% (2.4% y/y) increase in proprietors' income.

Wage & salary disbursements jumped 0.6% (5.9% y/y) after an upwardly revised like gain during September. Wages in the private service-producing industries surged 0.7% (6.4% y/y) and factory sector wages grew 0.6% (2.8% y/y) following an upwardly revised 0.1% September uptick. Revisions to the figures for April through September lowered the level of wages & salaries.

Disposable personal income increased 0.3% (4.9% y/y) after an unrevised 0.5% September increase. Personal taxes jumped 1.2% (12.1% y/y).

Adjusted for recently lower prices, disposable personal income rose a firm 0.6% (3.4% y/y) last month after the 0.8% jump during September. Real disposable income per capita advanced 0.5% (2.5% y/y).

Personal consumption rose 0.2% after the downwardly revised 0.2% September decline. Expectations had been for a 0.1% increase. When adjusted for the 0.2% decline in prices, real consumer spending rose 0.4%. A 2.8% m/m decline in unit vehicle sales last month held back the gain in PCE along with a 9.8% m/m decline (-16.8% y/y) in spending on gasoline & oil.

The PCE chain price index fell 0.2%, helped by last month's 12.1% decline in retail gasoline prices. Gasoline prices in November are down another 0.7% m/m. The 0.2% rise in prices less food & energy prices was a bit firmer than expectations for a 0.1% uptick. In addition, the three month change in core prices crept higher to 2.7% (AR).

Interest income rose 0.4% (7.6% y/y) while dividend income jumped another 1.1% (11.6% y/y).

The personal savings rate was a slightly less negative -0.6% last month but so far in 2006 has averaged -0.9%. Should the Decline in the Personal Saving Rate Be a Cause for Concern? from the Federal Reserve Bank of Kansas City is available here.

The Fed's latest Beige Book covering economic conditions around the country can be found here.

Disposition of Personal Income October September Y/Y 2005 2004 2003
Personal Income 0.4% 0.5% 5.8% 5.2% 6.2% 3.2%
Personal Consumption 0.2% -0.2% 5.0% 6.5% 6.6% 4.8%
Savings Rate -0.6% -0.7% -0.3% (Oct. '05) -0.4% 2.0% 2.1%
PCE Chain Price Index -0.2% -0.3% 1.5% 2.9% 2.6% 2.0%
  Less food & energy 0.2% 0.2% 2.4% 2.1% 2.0% 1.4%
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