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Economy in Brief

U.S. Consumers Choose To Save Income Gain 
by Tom Moeller January 30, 2012 

For the first time in six months, individuals made a meaningful effort to save rather spend a firm gain in income. The personal savings rate rose to 4.0% last month from an unrevised 3.5% in November. To be sure, it wasn't a great effort. While the rate's increase was the first of meaning since June, it remained below 5.2% one year ago and the Q4 average of 3.7% was the lowest since 2007.

Personal income rose 0.5% following an unrevised 0.1% November uptick. The latest beat Consensus expectations for a 0.4% rise. Wage & salary disbursements increased 0.4% (3.8% y/y) after a negligible November dip. A 1.9% jump (23.2% y/y) in rental income added to that increase while dividend income gained 1.5% (7.5% y/y). To the downside, interest income fell 0.3% (-2.9% y/y), off for the sixth straight month. Disposable income increased 0.4% (2.3% y/y). Adjusted for prices, disposable income increased 0.3% m/m but slipped 0.1% y/y despite the gains in payroll employment.

Personal consumption expenditures slipped marginally (3.9% y/y), essentially flat for the third consecutive month. Expectations had been for a 0.1% rise. The increase was held back by a 0.4% decline in nondurables which again reflected lower gasoline prices. Food consumption also fell 0.6% (+5.3% y/y) while spending of clothing was unchanged (4.1% y/y). Spending of durable goods also was weak and fell 0.4% (+5.5% y/y) as spending on recreational goods fell 1.5% (+3.1% y/y) and outlays on home furnishings slipped marginally (+4.8% y/y). Motor vehicle outlays rose 0.2% (7.9% y/y). Adjusted for price inflation spending slipped 0.1% last month (+1.4% y/y).

The PCE chain price index rose just 0.1% last month (2.4% y/y), the gain held back by a 1.9% drop (+10.9%) in gasoline prices. The core PCE price deflator rose 0.2%. The y/y increase of 1.8% was up from the record low 12-month change of 0.9% reached last December. Notable amongst the categories last month was a 5.0% y/y gain in food & beverage costs and a 4.5% y/y rise in clothing prices. In the durables sector, recreational goods prices posted a 6.2% y/y decline. Motor vehicle prices rose 3.2% y/y while furniture & appliance prices rose 0.1% y/y.

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 (%)
Dec Nov Oct Y/Y 2011 2010 2009
Personal Income 0.5 0.1 0.4 3.8 4.7 3.7 -4.3
  Wages & Salaries 0.4 -0.0 0.6 3.8 3.6 2.2 -4.3
Disposable Personal
Income
0.4 -0.0 0.2 2.3 3.4 3.6 -2.1
Personal Consumption
Expenditures
-0.0 0.1 0.1 3.9 4.7 3.8 -1.7
Saving Rate 4.0 3.5 3.6 5.2
(Dec'10)
4.4 5.3 5.1
PCE Chain Price Index 0.1 -0.0 -0.1 2.4 2.4 1.8 0.2
  Less Food & Energy 0.2 0.1 0.1 1.8 1.4 1.4 1.6
Real Disposable
Income
  0.3 -0.0 0.3 -0.1 0.9 1.8 -2.3
Real Personal Consumption
Expenditures
-0.1 0.1 0.1 1.4 2.2 2.0 -1.9
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