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Economy in Brief

U.S. Prices Eat Away Income Gain
by Tom Moeller  October 29, 2012

Disposable personal income grew 0.4% during September, the most in six months and a pickup from the negligible 0.1% August uptick. However, adjusted for price inflation, disposable personal income slipped marginally (+1.9% y/y) after an unrevised 0.3% August decline. That dropped three-month growth in take-home pay to -0.8% (AR), its weakest in twelve months. In nominal terms, overall personal income rose 0.4% (3.9% y/y), about as expected, fueled by an improved 0.3% (3.9% y/y) gain in wages & salaries. Proprietors income rose a hefty 1.1% (4.8% y/y) but interest income was down 1.2% (-1.6% y/y) for the third straight month. Transfer payments rose a moderate 0.5% (3.3% y/y).

Despite the recent decline in real income, consumers kept spending. The dollar value of personal consumption expenditures jumped 0.8% (3.8% y/y) last month, the largest increase in eighteen months. A 0.6% rise was anticipated. Nominal spending on durable goods jumped 1.1% (6.5% y/y), bolstered by a 1.4% (8.4% y/y) gain in spending on motor vehicles. Nondurables spending surged 1.7% (4.3% y/y). However, that increase reflected a 5.4% (7.1% y/y) surge in gasoline purchases. When adjusted for inflation, spending on gasoline fell 1.3% (+0.5% y/y). Overall, real personal spending grew 0.4% (2.1% y/y) last month. Spending on motor vehicles rose 1.5% (8.1% y/y) and spending on appliances & furniture jumped 1.4% (6.5% y/y).

The moderate gain in income, set against a firm rise in spending, reduced the personal savings rate to 3.3% last month, its lowest since November of last year. 

The PCE chain price index advanced another 0.4% (1.7% y/y). Nondurables prices jumped another 1.2% (2.4% y/y) with the rise in gasoline prices. Durable goods prices slipped 0.2% (-1.6% 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% (1.7% y/y) as it has for six months this year.

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(%) Sep Aug Jul Y/Y 2011 2010 2009
Personal Income 0.4 0.1 0.2 3.9 5.1 3.8 -4.8
  Wages & Salaries 0.3 0.1 0.2 3.9 4.0 2.1 -4.3
Disposable Personal Income 0.4 0.1 0.2 3.6 3.8 3.8 -2.7
Personal Consumption Expenditures 0.8 0.5 0.4 3.8 5.0 3.8 -1.9
Personal Saving Rate 3.3 3.7 4.1 3.5
(Sep'11)
14.2 5.1 4.7
PCE Chain Price Index 0.4 0.4 0.0 1.7 2.4 1.9 0.1
  Less Food & Energy 0.1 0.1 0.1 1.7 1.4 1.5 1.4
Real Disposable Income -0.0 -0.3 0.1 1.9 1.3 1.8 -2.8
Real Personal Consumption
Expenditures
0.4 0.1 0.3 2.1 2.5 1.8 -1.9
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