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Economy in Brief

U.S. Personal Savings Remain Low With Income Growth
by Tom Moeller November 23, 2011

Individuals continue to rely on savings rather than income to support spending. The personal savings rate remained depressed at 3.5%. However, September was revised down to 3.3%, from 3.5% reported last month, and the savings rate remained down from the 8.3% monthly peak reached in 2008. Disposable personal income rose 0.3% last month following changes between plus-or-minus 0.1% during the prior five months. Recent growth was worse when adjusted for prices. Though real take-home pay rose 0.3% last month, income has fallen at a 0.5% annual rate since December. Personal consumption expenditures ticked up 0.1% in October following a 0.7% jump. In real terms, spending also rose 0.1%. Despite weakened income, consumers raised spending 1.8% (AR) this year.

Overall personal income rose 0.4% last month following an unrevised 0.1% September uptick. A 0.3% increase had been expected. Wage & salary disbursements rose 0.5% (3.2% y/y) while proprietors' income fell 0.3% (3.4% y/y). Rental income was far stronger and rose 0.8% (17.0% y/y). Interest income rose 0.6% (0.8% y/y) following three months of decline and dividend income rose 0.3% (7.2% y/y).

The 0.1% October gain in personal consumption expenditures was short of expectations for a 0.4% rise. That followed an unrevised 0.6% September increase. Spending on durable goods rose 0.1% (6.8% y/y) following the 1.6% September gain. Outlays on motor vehicles were unchanged (4.5% y/y) after the incentive driven, 8.3% jump during September. Spending on furniture increased 0.4% (5.3% y/y) but apparel slipped 0.2% (+4.9% y/y). Spending on gasoline fell 3.9% (+16.6% y/y) but when adjusted for prices spending was off a lesser 1.1% (-5.6% y/y). Services spending rose 0.1% (3.6% y/y), paced by a 7.1% y/y increase in food services & accommodations and a 4.5% y/y increase in health care services.

The PCE chain price index slipped 0.1% last month (2.9% y/y) paced by a 2.7% drop (+23.5%) drop in gasoline prices. The core PCE price deflator rose marginally m/m (+1.7% y/y). The annual increase was up from the record-low 12-month change of 0.9% reached last December. Notable amongst the categories was a 5.1% y/y gain in food services, a 3.7% y/y rise in clothing prices but a 7.1% decline in recreational goods.

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 (%)
Oct Sep Aug Y/Y 2010 2009 2008
Personal Income 0.4 0.1 -0.1 3.9 3.7 -4.3 4.6
  Wages & Salaries 0.5 0.4 -0.1 3.2 2.2 -4.3 2.0
Disposable Personal
Income
0.3 0.1 -0.1 2.5 3.6 -2.1 5.8
Personal Consumption
Expenditures
0.1 0.7 0.2 4.7 3.8 -1.7 2.7
Saving Rate 3.5 3.3 3.9 5.3
(Oct'10)
5.3 5.1 5.4
PCE Chain Price Index -0.1 0.2 0.3 2.7 1.8 0.2 3.3
  Less Food & Energy 0.1 0.0 0.2 1.7 1.4 1.6 2.3
Real Disposable
Income
0.3 -0.1 -0.4 -0.1 1.8 -2.3 2.4
Real Personal Consumption
Expenditures
0.1 0.5 -0.1 2.0 2.0 -1.9 -0.6
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