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Economy in Brief

U.S. Real Take-home Pay Declines But Consumers Keep Spending
by Tom Moeller  September 28, 2012

Adjusted for price inflation, disposable personal income fell 0.3% during August. On a y/y basis, growth held up at 1.8% but three-month growth was slightly negative for the first time since November. The monthly decline reflected a steady 0.1% gain in nominal terms. That rise equaled the 0.1% uptick in total personal income which followed a downwardly revised  0.1% July gain, originally set at 0.3%. A 0.2% advance had been the consensus expectation. A 0.1% (3.7% y/y) rise in wages followed a like uptick in July and three-month growth was a diminished 2.4%. Proprietors income rose a firm 0.6% (4.1% y/y) but interest income fell 1.3% (-1.8% y/y) along with transfer receipts, off 0.1% (+2.7% y/y)

Despite the decline in real income, inflation adjusted personal consumption expenditures ticked up 0.1% (2.0% y/y) following a 0.4% July rise. However, showing moderation was three-month growth of 1.4% which was half of that six months ago. Nominal spending advanced 0.5% (3.6% y/y) during August. Also adjusted for inflation, spending on goods rose 0.4% (3.8% y/y) last month lifted by strength in vehicle sales (10.6% y/y) and home furnishings & appliances (6.2% y/y). Nondurables spending rose 0.3% (1.9% y/y) with strength in spending on apparel (3.6% y/y) but spending on services slipped 0.1% (+1.1% y/y).    

Firm spending growth in the face of a diminished income gain reduced the personal savings rate to 3.7% last month, its lowest since April. However, these figures remain up from November's low of 3.2%. 

The PCE chain price index advanced 0.4% (1.5% y/y). The monthly gain matched the strongest since June of 2009. Nondurables costs jumped 1.3% (1.7% y/y) with the rise in gasoline prices. Durable goods prices slipped 0.2% (-1.8% y/y) while services prices increased 0.2% (2.0% y/y). Less food and energy, the PCE chain price index ticked up 0.1% (1.6% y/y) as it did in July.

The personal income & consumption figures are available in Haver's USECON and USNA databases. The consensus expectations figures are in the AS1REPNA database.

Personal Income & Outlays(%) Aug Jul Jun Y/Y 2011 2010 2009
Personal Income 0.1 0.1 0.3 3.5 5.1 3.8 -4.8
  Wages & Salaries 0.1 0.1 0.4 3.7 4.0 2.1 -4.3
Disposable Personal Income 0.1 0.1 0.3 3.3 3.8 3.8 -2.7
Personal Consumption Expenditures 0.5 0.4 -0.0 3.6 5.0 3.8 -1.9
Personal Saving Rate 3.7 4.1 4.4 4.0
(Aug'11)
4.2 5.1 4.7
PCE Chain Price Index 0.4 0.0 0.1 1.5 2.4 1.9 0.1
  Less Food & Energy 0.1 0.1 0.2 1.6 1.4 1.5 1.4
Real Disposable Income -0.3 0.1 0.2 1.8 1.3 1.8 -2.8
Real Personal Consumption
Expenditures
0.1 0.4 -0.1 2.0 2.5 1.8 -1.9
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