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Economy in Brief

U.S. Income & Spending Weaken
by Tom Moeller  March 1, 2012

Individuals' wherewithal to spend diminished last month, so they didn't. Disposable personal income increased a scant 0.1% (2.3% y/y) as taxes jumped 1.6% (8.7% y/y). Adjusted for prices, disposable income slipped 0.1% m/m (+0.6% y/y). Personal income overall rose 0.3% following an unrevised 0.5% December gain. The latest missed Consensus expectations for a 0.4% rise. Holding back the gain in overall income were declines in Medicare (+1.5% y/y) and unemployment benefits (-18.1% y/y). Wage & salary disbursements increased 0.4% (5.0% y/y) after an upwardly revised 0.4% December gain.

Personal consumption expenditures increased 0.2% (3.8% y/y) after an unchanged December. Expectations had been for a 0.4% rise. The increase was held back by flat spending on services (+3.4% y/y). Nondurables spending rose 0.4% even though spending on gasoline fell 0.8% (+2.0% y/y); down 1.7% (-6.7% y/y) in real terms. Spending on durable goods jumped 0.9% (6.0% y/y) driven by a 2.3% gain 9.4% y/y) in motor vehicle purchases. Adjusted for inflation personal spending was flat (1.4% y/y) for the third consecutive month.

The personal savings rate fell to 4.6% from an upwardly revised 4.7% during December. It remained below 5.2% twelve months ago.

The PCE chain price index rose 0.2% last month (2.4% y/y), the strongest increase since September. The increase reflected a 0.9% rise (9.4% y/y) in gasoline prices. The core PCE price deflator rose 0.2% and the y/y increase of 1.9% was up from the record low 12-month change of 0.9% reached last 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(%) Jan Dec Nov Y/Y 2011 2010 2009
Personal Income 0.3 0.5 0.0 3.6 5.1 3.7 -4.3
 Wages & Salaries 0.4 0.4 -0.0 5.0 4.3 2.2 -4.3
Disposable Personal
Income
0.1 0.4 -0.0 3.0 3.8 3.6 -2.1
Personal Consumption
Expenditures
0.2 -0.0 0.0 3.7 4.4 3.4 -1.9
Saving Rate 4.6 4.7 4.3 5.2
(Jan'11)
4.7 5.3 5.1
PCE Chain Price Index 0.2 0.1 0.1 2.4 2.5 1.8 0.2
 Less Food & Energy 0.2 0.1 0.1 1.9 1.4 1.4 1.6
Real Disposable
Income
-0.1 0.3 -0.1 0.6 1.3 1.8 -2.3
Real Personal Consumption
Expenditures
0.0 -0.0 -0.0 1.4 2.2 2.0 -1.9
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