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Economy in Brief

U.S. Personal Income Gain Is Disappointing And Savings Decline
by Tom Moeller  March 30, 2012

Personal income increased just 0.2% during February after lessened gains of 0.2% and 0.4% during the prior two months. The latest rise missed expectations for a 0.4% gain. Wage & salary disbursements reflected the improved gains in payroll employment with a 0.3% rise (4.4% y/y). However, the firm gain was offset by another dip in interest income (-3.1% y/y) and just a 0.1% rise (1.0% y/y) in transfer receipts. Disposable personal income rose 0.2% (2.6% y/y) although take-home pay, when adjusted for price inflation, slipped 0.1% (+0.3% y/y), down for the third month in the last four.

Despite these disappointments consumers kept spending. Personal consumption expenditures jumped 0.8% (4.1% y/y), their strongest gain in a year. Earlier figures were revised upward. Expectations had been for a 0.6% rise. The increase was driven by a 3.9% rise (2.6% y/y) in spending on gasoline, a 3.3% gain (9.5% y/y) in motor vehicles and a 1.2% increase (4.4% y/y) in clothing. Spending on recreation also rose a firm 0.9% (7.5% y/y). The rise in gasoline outlays actually translated into a 7.0% y/y decline when adjusted for higher prices. Overall, when adjusted for inflation real PCE increased 0.5% (1.8% y/y), the best gain since June.

All this spending came at the expense of savings. The personal savings rate fell to 3.7% from a downwardly revised 4.3% during January. It remained below the 5.0% level twelve months ago and a 2010 monthly high of 5.8%.

The PCE chain price index rose 0.3% last month (2.3% y/y), the strongest increase since August. The increase reflected a 5.7% rise (10.4% y/y) in gasoline prices after a 0.9% January rise. The core PCE price index ticked up 0.1% 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.

Okun's Law and Long Expansions from the Federal Reserve Bank of New York is available here.

Personal Income & Outlays(%) Feb Jan Dec Y/Y 2011 2010 2009
Personal Income 0.2 0.2 0.4 3.2 5.1 3.7 -4.3
 Wages & Salaries 0.3 0.4 0.4 4.4 4.3 2.2 -4.3
Disposable Personal
Income
0.2 0.0 0.4 2.6 3.8 3.6 -2.1
Personal Consumption
Expenditures
0.8 0.4 0.2 4.1 4.7 3.8 -1.7
Personal Saving Rate 3.7 4.3 4.7 5.0
(Feb'11)
4.7 5.3 5.1
PCE Chain Price Index 0.3 0.2 0.1 2.3 2.5 1.8 0.2
 Less Food & Energy 0.1 0.2 0.2 1.9 1.4 1.4 1.6
Real Disposable
Income
-0.1 -0.2 0.3 0.3 1.3 1.8 -2.3
Real Personal Consumption
Expenditures
0.5 0.2 0.1 1.8 2.2 2.0 -1.9
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