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Economy in Brief

U.S. Personal Income Improves but Spending Moderates
by Tom Moeller  February 28, 2011

Personal income rose an improved 1.0% last month, more-than-double expectations. However, the improvement was limited to a 2.1% spike in rental income, up 10.6% y/y. Elsewhere, income growth continued moderate. The December gain in income was unrevised at 0.4%. Disposable personal income increased 0.7%, the fastest increase since April of last year. 

Growth in wages & salaries remained moderate at 0.3% (3.8% y/y) while proprietors' income grew 0.4% (6.4% y/y) following a 0.8% December spike. Economic improvement also raised dividend income by 1.1% (5.4% y/y) last month, the same as in December. A moderation of the rise in interest rates, which caused interest income to rise roughly 1.2% for three consecutive months, left the January gain at 0.2% and still down 0.9% y/y.

The rise in personal consumption expenditures was limited by severe winter weather to just 0.2% versus a 0.5% December gain, revised down from 0.7%. A 0.4% January increase had been expected. Spending on goods rose 0.7% (7.0% y/y) after an upwardly revised 1.0% December increase. A 1.3% jump (9.6% y/y) in gasoline expenditures was behind much of the overall gain. Constant dollar spending on gasoline fell 2.6% (-1.9% y/y). Spending on apparel was unchanged (+5.6% y/y) following a 0.4% December decline. Spending on furniture fell 0.2% (+4.5% y/y) but spending on motor vehicles rose 0.6% (21.3% y/y), up 19.5% y/y in real terms. Spending on services slipped modestly (+2.6% y/y).

The personal savings rate improved to 5.8% from an upwardly revised 5.4% in December. The latest equaled the 5.8% for all of last year which was roughly constant with 2009. However, these rates remained up from the monthly low of 1.8% late in 2007.

Price inflation increased with higher energy prices. The PCE chain price index rose 0.3% last month after a 0.3% December rise. Higher energy costs accounted for the increase with a 2.3% (6.7% y/y) jump. Food prices also gained an accelerated 0.7% (1.7% y/y). The core PCE price deflator ticked up just 0.1% and 0.8% y/y), still a record low.

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

Personal Income & Outlays (%) Jan Dec Nov Y/Y 2010 2009 2008
Personal Income 1.0 0.4 0.3 4.6 3.0 -1.7 4.0
  Wages & Salaries 0.3 0.3 -0.0 3.8 2.1 -4.3 2.1
Disposable Personal Income 0.7 0.4 0.3 3.9 3.1 0.7 5.1
Personal Consumption Expenditures 0.2 0.5 0.3 4.0 3.5 -1.0 3.0
Saving Rate 5.8 5.4 5.4 5.7
(Jan.'10)
5.8 5.9 4.1
PCE Chain Price Index 0.3 0.3 0.1 1.2 1.7 0.2 3.3
  Less Food & Energy 0.1 0.0 0.1 0.8 1.3 1.5 2.3
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