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Economy in Brief

U.S. Income Gain Modest after May Surge
by Tom Moeller August 4, 2008

Nominal personal income inched up 0.1% last month following a revised 1.8% May surge which was due to the first installment of the government's tax rebate checks being mailed out. During May, the government distributed $48.1 billion in economic stimulus checks. Last month, the government sent $27.9 billion worth of checks. The June gain in income exceeded Consensus expectations for a 0.2% decline. Excluding rebates income rose just 0.4%.

Disposable personal income fell 1.9% last month after the 5.7% spike during May. Net taxes jumped 18.6% in June following the 24.4% May decline.

Wage & salary income rose a minimal 0.2% (4.5% y/y) after a 0.3% rise during May. These moderate increases reduced the annualized three-month growth in wages to 2.8% versus a 5.8% rise during 2007 and a 6.3% 2006 gain. Factory sector wages rose 0.1% (1.5% y/y) after a 0.2% May uptick. Wages & salaries in the private service-providing industries ticked up 0.2% (5.1% y/y). Wages in the government sector, however, have been strong and they posted a 0.5% (5.4% y/y) rise and three-month growth rose to 5.3%.

Interest income fell 0.7% (-1.8% y/y) and that was the ninth consecutive month of decline. Year-to-year growth fell to -1.8% after a 7.9% rise during all of 2007. Dividend income rose 0.6% (8.4% y/y) after a 12.4% rise last year and a 21.7% gain during 2006.

The PCE chain price index jumped 0.8% driven higher by rising energy prices. Some spillover to other prices may be apparent as the core PCE price index rose 0.3%. That exceeded Consensus forecasts for a 0.2% rise. Three-month growth in core prices rose to 2.3% from the recent low of 1.9%. Durable goods prices fell at a 2.0% rate during the last three months but services prices rose at an accelerated 4.3% annual rate.

Personal consumption expenditures rose another 0.6% after the 0.8% during May. Adjusted for price inflation, however, real spending fell 0.2% after a 0.3% May increase. Three-month growth in real spending amounted to just 0.9% (AR).

The personal savings rate halved versus May to 2.5% as a result of the rebate checks started being been spent.

The Changing Nature of the U.S. Balance of Payments from the Federal Reserve Bank of New York can be found here.

Disposition of Personal Income (%) June May Y/Y 2007 2006 2005
Personal Income 0.1 1.8 5.7 6.1 7.1 5.6
  Disposable Personal Income -1.9 5.7 7.6 5.5 6.4 4.4
Personal Consumption 0.6 0.8 5.3 5.5 5.9 6.2
Saving Rate 2.5 4.9 0.5 (June '07) 0.5 0.7 0.3
PCE Chain Price Index 0.8 0.5 4.1 2.6 2.8 2.9
  Less food & energy 0.3 0.2 2.3 2.2 2.3 2.1
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