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Economy in Brief

U.S. Income Surges But Spending Slows
by Tom Moeller  January 31, 2013

Personal income jumped 2.6% (6.9% y/y) last month after a revised 1.0% November gain, initially reported as 0.6%. A 0.8% rise was the consensus expectation. Last month's jump centered on a 34.3% surge (49.6% y/y) in dividend income. For all of 2012, total personal income growth decelerated to 3.5% from 5.1% in 2011. Income other than from dividends was solid last month. Wage & salary earnings rose a firm 0.6% (4.6% y/y) following an upwardly revised 0.9% November jump. Interest income surged 1.9% (2.7% y/y) and proprietors' income rose 0.8% (5.8% y/y. To the moderate side, transfer receipts increased 0.4% (3.5% y/y) while rental incomes rose 0.4% (12.5% y/y) as well. 

Despite the surge in income, consumers raised spending by just 0.2% (3.6% y/y). That followed an unrevised 0.4% November rise and compared to expectations for a 0.3% gain. Leading last month's spending was a 2.2% rise (11.8% y/y) in motor vehicle purchases and a 0.9% gain (4.4% y/y) in home furnishings & appliances. Services spending increased a modest 0.2% (3.2% y/y) but purchases of nondurables fell 0.2% (+2.7% y/y). That decline was led by lessened outlays for gasoline, off 4.0% (+0.9% y/y) due to lower prices. Spending on clothing rose 0.7% (4.2% y/y).

With the jump in income and the modest gain in spending, the personal savings rate surged to 6.5%, its highest level since May of 2009. That's up from 3.9% for all of 2012.

The PCE chain price index dipped slightly (+1.3% y/y) with a 2.1% decline (+1.8% y/y) in gasoline prices, the third consecutive monthly fall. Prices excluding food and energy also were unchanged (1.4% y/y) for the second consecutive month. Motor vehicle costs were unchanged (0.6% y/y); furniture prices fell 0.3% (-0.5% y/y) and clothing prices dropped 0.2% (+1.9% y/y). Services prices ticked up 0.1% (1.9% y/y). 

Adjusted for price changes, disposable income gained 2.8% (2.5% y/y) and real spending rose 0.2% (2.2% y/y) during December.

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 (%) Dec Nov Oct Y/Y 2012 2011 2010
Personal Income 2.6 1.0 0.1 6.9 3.5 5.1 3.8
  Wages & Salaries 0.6 0.9 -0.2 4.6 3.2 4.0 2.1
Disposable Personal Income 2.7 1.0 0.1 7.0 3.3 3.8 3.8
Personal Consumption Expenditures 0.2 0.4 -0.1 3.6 3.6 5.0 3.8
Personal Saving Rate 6.5 4.1 3.4 3.4
(Dec'11)
3.9 14.2 5.1
PCE Chain Price Index -0.0 -0.2 0.1 1.3 1.7 2.4 1.9
  Less Food & Energy 0.0 0.0 0.1 1.4 1.7 1.4 1.5
Real Disposable Income 2.8 1.3 -0.1 5.6 1.5 1.3 1.8
Real Personal Consumption
Expenditures
0.2 0.6 -0.2 2.2 1.9 2.5 1.8
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