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Economy in Brief

U.S. Personal Income & Spending Improve With Higher Prices
by Tom Moeller  August 29, 2011

Personal income matched expectations and rose 0.3% last month following a revised 0.2% June increase, initially reported as 0.1%. Disposable income also rose a slightly improved 0.3%. These gains, however, were eroded by a faster increase in prices. Constant dollar take-home pay slipped 0.1% last month after an upwardly revised 0.3% June rise. Real take-home income increased 1.2% (AR) during the last three months and that was slightly improved versus Q2.

Wages & salaries rose 0.4% during July after a 0.1% uptick in June. The gain was driven by the slight increase in payroll employment. Amongst other categories, the most pronounced increase was in rental income which surged 1.3% (14.1% y/y) after three months of moderate decline. Proprietors' income gained 0.3% (6.0% y/y). Transfer payments inched up 0.1% and the easier y/y increase of 4.1% contrasted to 13.8% in 2009, lifted by the poor job market. A better economy also raised dividend income last month by 1.0% (9.2% y/y) following last year's 19.9% jump. Interest income slipped 0.1% (2.3% y/y). That followed a 9.5% decline last year and a 19.8% drop in 2009.

Personal consumption expenditures gained 0.8% in July after a downwardly revised 0.1% slip during June. A 0.5% July increase had been expected. Spending on durable goods surged 1.9% (6.7% y/y) as expenditures on motor vehicles rose 5.3% (9.2% y/y). That followed four consecutive months of decline. Spending on furniture also rose an improved 0.6% (4.7% y/y) but apparel expenditures inched up just 0.2% (6.6% y/y). The rise in prices pulled outlays on gasoline 2.2% higher (26.5% y/y). Services spending rose 0.7% (3.4% y/y), paced by a 6.1% annual increase in food services & accommodations and a 4.9% rise in spending on health care. In constant dollars, real personal consumption expenditures rose 0.8%.

The personal savings rate slipped to 5.0%, the lowest level since March.

The PCE chain price index jumped 0.4% last month (2.8% y/y) with the rise in gasoline prices. The gas price index rose by one-third y/y. The core PCE price deflator rose a lesser 0.2% and by 1.6% y/y. That's up from the record low year-to-year change of 0.9% reached this past December. Notable amongst the categories was a 3.8% y/y increase in the price index for motor vehicles.

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 (%) Jul Jun May Y/Y 2010 2009 2008
Personal Income 0.3 0.2 0.3 5.3 3.7 -4.3 4.6
  Wages & Salaries 0.4 0.1 0.3 3.9 2.2 -4.3 2.0
Disposable Personal Income 0.3 0.2 0.2 4.0 3.6 -2.1 5.8
Personal Consumption Expenditures 0.8 -0.1 0.1 5.1 3.8 -1.7 2.7
Saving Rate 5.0 5.5 5.2 5.7
(Jul'10)
5.3 5.1 5.4
PCE Chain Price Index 0.4 -0.1 0.2 2.8 1.8 0.2 3.3
  Less Food & Energy 0.2 0.2 0.3 1.6 1.4 1.6 2.3
Real Disposable Income -0.1 0.3 0.1 1.2 1.8 -2.3 2.4
Real Personal Consumption Expenditures 0.5 -0.0 -0.0 2.3 2.0 -1.9 -0.6
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