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Economy in Brief

U.S. Personal Income Gains Minimally As Spending Recovers
by Tom Moeller November 25, 2009

Negative job growth continued to minimize personal income growth last month. Personal income gained 0.2% during October after an upwardly revised like increase in September. The latest figure matched Consensus expectations. While the gains have been small, they are improved from early this year due to easier declines in employment which have been accompanied by higher gov't transfer payments.

Wages & salaries were unchanged last month after a revised 0.1% September increase. Year-to-year wages fell 3.6% following a 2.1% increase during 2008. Wages in the factory sector fell 0.5% (-11.2% y/y) after a minimal September decline. In the service sector wages rose just 0.1% (-2.6% y/y), but continuing to offset some of this weakness has been the government sector where wages rose 2.7% y/y.

Growth in unemployment insurance payments has slowed recently. They increased just 0.1% last month after a 10.4% 3Q increase and a 27.4% 2Q gain. Interest income rose 0.5% (-5.6% y/y) as the decline in rates found a bottom while dividend income fell by 0.2% (-21.2% y/y).

Disposable personal income rose an improved 0.4% due to lower tax payments. Adjusted for inflation real disposable income rose 0.2% after a 0.4% 3Q decline. The saving rate slipped modestly to 4.6% from an upwardly revised 4.6% during September. The rate remained up from last year and more than double the 2007 level due to reduced spending.

Personal spending gained 0.3% as durables spending increased 0.2% (0.1% y/y). Spending on motor vehicles recovered 8.6% (3.5% y/y) after the September drop. That increase was offset by a 0.6% (-4.0% y/y) decline in spending on furniture & appliances. Spending on nondurables increased 0.4% (-1.4% y/y) as outlays on apparel rose for the fourth straight month (0.5% y/y) . Outlays on gasoline rose 0.7% with higher prices but were down 17.9% from one year ago. Outlays on services increased 0.5% (1.8% y/y) as spending on health care continued quite strong posting a 5.6% gain versus last year.

The PCE chain price index increased 0.3% during October lifted by a firm 2.1% increase in gasoline costs. Less food-and-energy, "core" prices were again soft and posted just a 0.2% increase. Prices for durable goods rose just 0.1% as home furnishing prices fell (-1.9% y/y) while prices for services gained a steady 1.2% y/y.

The personal income & consumption figures are available in Haver's USECON and USNA databases.

Disposition of Personal Income (%)  October September August Y/Y 2008 2007
Personal Income 0.2 0.2 0.3 -1.0 2.9 5.6
   Disposable Personal Income 0.4 0.2 0.3 2.4 3.9 4.9
Personal Consumption Expenditures 0.7 -0.6 1.3 0.9 3.1 5.4
Saving Rate 4.4 4.6 3.9 2.9 (Oct. '08) 2.6 1.7
PCE Chain Price Index 0.3 0.1 0.3 0.2 3.3 2.7
   Less food & energy 0.2 0.1 0.1 1.4 2.4 2.4
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