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Economy in Brief

U.S. Personal Income About On Forecast, Core Prices Again Up 0.1%
by Tom Moeller July 31, 2007

Personal income rose 0.4% last month, the same as during May. The June increase about matched Consensus expectations for a 0.5% gain. The June increase at 6.1% y/y left income growing near the rate of increase during the last three years.

The report of a 0.1% increase in the PCE chain price index during June brought with it a 0.1% rise in the core PCE price measure, the fourth 0.1% increase in a row. It was slightly below expectations for a 0.2% gain. annualized, the gain in core prices came in at 1.6% over the last three months. The increase in the total PCE price index was 3.8% during the same three months (AR): down from the 5.0% three month gain during May.

Wages & salaries increased 0.5% (6.7% y/y) and factory sector wages rose the same 0.5% (5.6% y/y) after a 0.1% May rise.Wage & salary income in service producing industries rose 0.6% (7.4% y/y) after a 0.5% increase in May while pay in the government sector rose 0.4% (5.0% y/y).

Interest income ticked up 0.1% (1.1% y/y) for the third consecutive month while dividend income rose 1.0% (14.2% y/y), about the same as during the prior six months.

Personal current taxes increased 0.7% (10.7% y/y). That left disposable personal income to grow 0.4% (5.5% y/y) after a 0.4% May gain. Real disposable personal income thus rose 0.3% (3.1% y/y) last month after a 0.1% decline during May.

Personal consumption expenditures increased just 0.1% in June following a little revised 0.6% gain during May. Expectations were for 0.2% rise. Durable goods purchases reversed all of the prior month’s increase with a 1.6% (+2.6% y/y) decline as spending on motor vehicles fell 2.1% (+2.0% y/y) and spending on furniture & other household equipment fell 1.0% (+2.5 y/y. Lower gasoline prices dropped spending on gasoline by 0.4% (+4.4% y/y) and spending on apparel fell 0.8% (+3.5% y/y). One of the few increases in spending last month was on medical care by 0.5% (6.3% y/y).

The personal saving rate was back in positive territory as earlier upward revisions brought it to 0.6% in June.

Disposition of Personal Income June May Y/Y 2006 2005 2004
Personal Income 0.4% 0.4% 6.1% 6.6% 5.9% 6.2%
Personal Consumption 0.1% 0.6% 5.2% 5.9% 6.2% 6.4%
Saving Rate 0.6% 0.4% 0.5% (June 06) -1.1% -0.4% 2.0%
PCE Chain Price Index 0.1% 0.5% 2.3% 2.8% 2.9% 2.6%
  Less food & energy 0.1% 0.1% 1.9% 2.2% 2.2% 2.1%
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