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Economy in Brief

U.S. Personal Income Light, Real DPI Down and Real PCE Easier
by Tom Moeller November 30, 2007

Personal income during October rose 0.2% and the increase fell slightly short of Consensus forecasts for a 0.4% gain. The rise followed two months of 0.4% increased it lowered the three month growth in income to 4.3% (AR), its worst since June.

A shortfall in wages & salaries accounted for much of October's easier income performance with a 0.1% (5.2% y/y) rise after a 0.6% September increase. Three month growth dipped to 4.1%, also the lowest since June. Factory sector wages fell 0.2% (+1.9% y/y) following downwardly revised gains in prior months.Wage & salary income in the private service-producing industries rose a slim 0.1% (6.1% y/y), also after downwardly revised earlier results, and wages in the government sector rose 0.4% (4.5% y/y).

Interest income grew just 0.1% (5.7% y/y) after a 0.6% September rise and dividend income popped another 0.9% (13.0% y/y).

Personal current taxes rose 0.5% (8.6% y/y). As a result, disposable personal income rose only 0.1% (5.7% y/y) but adjusted for inflation, disposable personal income fell 0.2% (+2.7% y/y) after a 0.2% September increase. That left the three month growth in real DPI at 2.1%, its lowest since June.

Personal consumption expenditures rose 0.2% in October and the gain matched expectations. Adjusted for inflation spending fell very slightly m/m and the three month growth of 1.8% was its weakest since May.

Spending on discretionary items seemed to ease as real spending on motor vehicles fell 0.9% (+2.7% y/y) and spending on household furniture & appliances dropped 0.3% (+7.4% y/y). Spending on apparel was unchanged (+4.2% y/y) and spending on recreation fell 0.3% (+2.5% y/y). These detailed spending figures are available in Haver's USNA database.

The PCE chain price index rose 0.3% and the y/y increase of 2.9% was its quickest since the middle of last year. The core PCE price index gained 0.2%, the same as in September. While y/y growth in core prices has been stable at 1.9%, a pickup to 2.3% (AR) over the last three months does not bode well for overall pricing pressure even given the recent easing of the upward march in oil prices.

Can Social Security Survive the Baby Boomers? from the Federal reserve Bank of St. Louis can be found here.

National and regional economic overview is yesterday's presentation by Fed ChairmanBen S. Bernanke and it is available here.

Disposition of Personal Income October September Y/Y 2006 2005 2004
Personal Income 0.2% 0.4% 6.0% 6.6% 5.9% 6.2%
Personal Consumption 0.2% 0.3% 5.4% 5.9% 6.2% 6.4%
Saving Rate 0.5% 0.7% 0.4% (Oct. 06) 0.4% 0.5% 2.1%
PCE Chain Price Index 0.3% 0.3% 2.9% 2.8% 2.9% 2.6%
  Less food & energy 0.2% 0.2% 1.9% 2.2% 2.2% 2.1%
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