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Economy in Brief

U.S. Personal Spending Growth Improves
by Tom Moeller  March 28, 2011

Personal consumption expenditures grew 0.7% last month after a 0.3% January gain that was revised up from 0.2%. A 0.5% February increase had been expected. Spending on goods rose 1.5% (7.4% y/y) after a 0.8% January increase. A 6.2% jump (16.0% y/y) in gasoline expenditures powered the overall gain. Spending on apparel rose 1.0% (3.8% y/y) following two months of moderate decline. Spending on furniture & other household equipment rose 0.2% (2.3% y/y) but spending on motor vehicles rose 3.7% (23.6% y/y). Spending on services gained 0.2% (2.5% y/y). Year-to-year growth was led by health care (4.4%), transportation (4.2%) and restaurants & lodging (4.2%).

Personal income rose 0.3% last month versus a 0.4% expectation. A 0.4% gain had been expected. The increase followed an upwardly revised 1.2% January rise. Disposable personal income gained 0.3%.

Last month's increase was again paced by a strong 2.6% increase (11.4% y/y) in rental income. Growth in wages & salaries remained moderate at 0.3% (4.1% y/y) for the third consecutive month and proprietors' income grew 0.3% (6.5% y/y). Economic improvement raised dividend income by 1.2% (6.1% y/y) last month while interest income slipped 0.1% (-0.3% y/y). The personal savings rate slipped to 5.8% from an upwardly revised 6.1% in January. 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.

The PCE chain price index rose 0.4% last month after a 0.3% January increase. Higher energy costs accounted for most of the strength with a 4.8% jump (18.6% y/y). Food prices also gained an accelerated 0.8% (2.4% y/y). The core PCE price deflator rose 0.2%, and 0.9% y/y, still near the record low. Weakness was paced by a 5.3% y/y drop in recreational products, a 3.2% y/y decline in furniture & household goods and a 0.9% y/y decline in clothing & footwear prices.

The personal income & consumption figures are available in Haver's USECON and USNA databases. The expectations figures are in the AS1REPNA database.

Changed Circumstances: The Impact of the Financial Crisis on the Economic Condition of Workers Near Retirement and of Business Owners is the title of last week's speech by Fed Governor Elizabeth A. Duke and it can be found here.

Personal Income & Outlays (%) Feb Jan Dec Y/Y 2010 2009 2008
Personal Income 0.3 1.2 0.5 5.1 3.1 -1.7 4.0
  Wages & Salaries 0.3 0.3 0.3 4.1 2.1 -4.3 2.1
Disposable Personal Income 0.3 0.8 0.5 4.4 3.1 0.7 5.1
Personal Consumption Expenditures 0.7 0.3 0.4 4.1 3.5 -1.0 3.0
Saving Rate 5.8 6.1 5.6 5.4
(Feb.'10)
5.8 5.9 4.1
PCE Chain Price Index 0.4 0.3 0.3 1.6 1.7 0.2 3.3
  Less Food & Energy 0.2 0.2 0.0 0.9 1.3 1.5 2.3
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