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Economy in Brief

U.S. Personal Income & Spending Are Stable But Revisions Raise Savings
by Tom Moeller August 03, 2010

A soft labor market continued last month to exact its toll on income growth. Personal income during June was unchanged after a downwardly revised 0.3% May gain. A 0.2% increase had been expected. Revisions to the last three years' figures were minor except for a lift to growth during 2008. Last month's stability reflected a 0.1% dip in wages & salaries after two months of 0.4% increase. Nevertheless, the modestly improved labor market helped wages rise 1.2% y/y after the 4.3% decline during all of last year. Factory sector wages fell 0.9% and gave back nearly all of their downwardly revised May increase. Nevertheless, improved productivity helped wages rise 1.4% y/y. Service sector wages ticked up 0.1% (1.7% y/y) and were improved from the 4.1% drop during all of last year. Government wages slipped 0.1% (+1.5% y/y). Proprietors' income rose a greatly improved 4.6% y/y after last year's 8.2% drop while the decline in interest income moderated to 2.2%. Improved corporate profits led to an improved 3.0% y/y rise in dividends. 

In light of  modest income growth, personal consumption expenditures also were roughly unchanged following the downwardly revised 0.1% May dip. A 0.1% uptick had been expected. Revisions to 2009 also deepened the decline in spending to 1.0% for the full year. In real terms, stable prices allowed real spending also to rise 0.1% during June. It's up 1.7% y/y versus the moderate declines of the last two years. Detailed PCE figures will be available from BEA by Friday.

The personal savings rate crept up to 6.4%, its highest level in twelve months. However, upward revisions to income coupled with downward revisions to spending were responsible for an upward revision to the full-year savings rate to 5.9% in 2009.

The PCE chain price index slipped marginally for the third consecutive month with the drop in gasoline prices. The core PCE price deflator was unchanged after two modest 0.1% increases.

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

A Jump In Consumer Loans? from the Federal Reserve Bank of  St. Louis is available here.

Disposition of Personal Income (%)  June May April Y/Y 2009 2008 2007
Personal Income 0.0 0.3 0.4 2.6 -1.7 4.0 5.7
   Disposable Personal Income 0.0 0.3 0.5 2.5 0.7 5.1 5.1
Personal Consumption Expenditures -0.0 0.1 -0.1 3.1 -1.0 3.0 5.2
Saving Rate 6.4 6.3 6.0 6.7 (June '09) 5.9 4.1 2.1
PCE Chain Price Index -0.1 -0.1 -0.0 1.4 0.2 3.3 2.7
   Less food & energy 0.0 0.1 0.1 1.4 1.5 2.3 2.4
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