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Economy in Brief

U.S. Income Gain Is Moderate & Spending Is Flat
by Tom Moeller  June 27, 2011

Personal income rose 0.3% last month following a 0.3% increase during April, initially reported as 0.4%. A 0.4% gain had been expected. Disposable income gained 0.2%, the same as in April. Adjusted for prices, however, growth was weaker. Constant dollar take-home pay rose 0.1% and made up for April's 0.1% downtick. These latest changes pulled y/y growth in real income down to 0.6%.

Growth in wages & salaries was modest at 0.2%, reflecting last month's negligible increase in payroll employment. Rental income remained strong and rose 1.0% (13.6% y/y), while proprietors' income fell 0.2% (+5.0% y/y). Transfer payments rose 0.4% but the y/y increase eased to 3.4% with the improved job market. Economic improvement also raised May dividend income by 0.6% (4.8% y/y). Higher interest rates raised interest income by 0.5% (1.9% y/y). The personal savings rate ticked up to 5.0%.

Personal consumption expenditures were unchanged last month after a 0.3% April rise, but that increase was revised lower from 0.4%. A 0.1% May uptick had been expected. Spending on goods fell 0.7% (+8.5% y/y) while auto sales fell for the third straight month (+7.4% y/y). Spending on gasoline & energy also fell 2.4% (+29.3%) with the slip in prices. Apparel spending rose 0.3% (+4.8% y/y) and made up April's decline. Services spending rose 0.4% (2.8% y/y). In constant dollars, real personal consumption expenditures slipped 0.1% (+2.1% y/y), the same as in April.

The PCE chain price index rose 0.2% last month (2.5% y/y). A 2.1% decline (+36.7% y/y) in gasoline prices held back the increase, but it was countered by a 1.3% jump (1.0% y/y) in apparel prices. Home furnishings prices rose 0.3% (-2.3% y/y) and food prices gained 0.3% (3.5% y/y). The core PCE price deflator rose 0.3% and 1.2% y/y versus the record low year-to-year gain of 0.7% reached in December.

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

Personal Income & Outlays (%) May Apr Mar Y/Y 2010 2009 2008
Personal Income 0.3 0.3 0.4 4.2 3.0 -1.7 4.0
  Wages & Salaries 0.2 0.4 0.3 2.8 2.0 -4.3 2.1
Disposable Personal Income 0.2 0.2 0.4 3.1 3.1 0.7 5.1
Personal Consumption Expenditures 0.0 0.3 0.6 4.7 3.5 -1.0 3.0
Saving Rate 5.0 4.9 4.9 6.2
(May'10)
5.8 5.9 4.1
PCE Chain Price Index 0.2 0.3 0.4 2.5 1.7 0.2 3.3
  Less Food & Energy 0.2 0.2 0.2 1.2 1.3 1.5 2.3
Real Disposable Income 0.1 -0.1 0.0 0.6 1.4 0.6 1.7
Real Personal Consumption Expenditures -0.1 -0.1 0.2 2.1 1.7 -1.2 -0.3
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