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Economy in Brief

U.S. Consumer Spending Continues To Drain Savings
by Tom Moeller  January 31, 2014

Personal consumption expenditures increased 0.4% (3.6% y/y) last month following an upwardly revised 0.6% November gain. A 0.2% rise had been expected in the Action Economics forecast survey. During all of 2013, spending rose 3.1% after a 4.0% gain in 2012. It was the weakest annual rise of the economic recovery. Motor vehicle purchases declined 4.9% (+0.2% y/y) while spending on furnishings and household equipment posted a 0.4% decline (3.7% y/y). Clothing purchases jumped 1.2% (3.9% y/y) but gasoline expenditures increased 4.1% (3.5% y/y) with higher prices. Services outlays improved 0.4% (3.6% y/y) led by a 0.9% rise (5.1% y/y) in spending on food services & accommodations. Adjusted for inflation PCE gained 0.2% (2.5% y/y).

Individuals dipped further into savings to maintain spending. The personal savings rate fell to 3.9% in December from an upwardly revised 4.3% in November. It was the lowest saving rate since January and nearly the lowest since January 2008. The total amount of personal saving was down by more than one-half year-to-year after it spiked late in 2012.

Personal income was unchanged (-0.8% y/y) after a 0.2% November rise. The latest disappointed expectations for another 0.2% rise. Disposable personal income was similarly little changed (-2.7% y/y). Wages & salaries held steady and the 0.6% year-to-year increase was the weakest since December 2008. Rental earnings rose 0.3% (8.4% y/y), interest income gained 0.2% (0.1% y/y) and dividend income ticked up 0.1% (-23.1% y/y). Transfer receipts also nudged up 0.1% (2.4% y/y). These increases were countered by a 0.6% decline (+6.9% y/y) in proprietors' income. Adjusted for price inflation disposable income declined 0.2% (-2.7% y/y).

The PCE chain price index increased 0.2% (1.1% y/y) in December, the strongest showing in six months. For all of last year, however, prices increased 1.1%, the weakest rise since a 0.1% slip in 2009. Less food & energy, the chain price index rose a steady 0.1% (1.2% y/y). Here again, it was the weakest annual gain since 2009. Durable goods prices fell 0.4% (-2.1% y/y) led lower by a 0.6% decline (-3.3 y/y) in home furnishings prices. Recreational goods costs were off 0.7% (-5.1% y/y) while motor vehicles prices slipped 0.1% (+0.6% y/y). Nondurable goods prices jumped 0.5% (0.2% y/y) led higher by a 3.3% jump (-1.0% y/y) in gasoline prices. Prices for services gained 0.2% (1.9% y/y).

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

Personal Income & Outlays (%) Dec Nov Oct Y/Y 2013 2012 2011
Personal Income 0.0 0.2 -0.1 -0.8 2.8 4.2 6.1
  Wages & Salaries 0.0 0.5 0.1 0.6 3.0 4.3 4.1
Disposable Personal Income -0.0 0.1 -0.2 -1.7 1.9 3.9 4.8
Personal Consumption Expenditures 0.4 0.6 0.1 3.6 3.1 4.1 5.0
Personal Saving Rate 3.9 4.3 4.8 8.7
(Dec'12)
4.5 5.6 5.7
PCE Chain Price Index 0.2 0.0 -0.0 1.1 1.1 1.8 2.4
  Less Food & Energy 0.1 0.1 0.1 1.2 1.2 1.8 1.4
Real Disposable Income -0.2 0.1 -0.2 -2.7 0.7 2.0 2.4
Real Personal Consumption Expenditures 0.2 0.6 0.1 2.5 2.0 2.2 2.5
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