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Economy in Brief

U.S. Spending Strength Leaves Savings Rate Near Six-Year Low
by Tom Moeller  May 1, 2014

Shop 'til you drop. That mentality raised personal consumption expenditures by 0.9% in March (4.0% y/y) following a 0.5% February increase, revised from 0.3%. It was the strongest gain since August 2009. A 0.6% rise had been expected in the Action Economics Forecast Survey. A 5.9% jump (6.1% y/y) in motor vehicle purchases led the gain in spending. That was followed by a 1.0% rise (2.1% y/y) in recreation services and a 1.0% gain (4.0% y/y) in housing & utilities. Clothing purchases grew another 0.9% (0.9% y/y) and purchases at restaurants jumped 0.9% (4.0% y/y). Spending on home furnishings & household equipment increased 0.8% (2.2% y/y) while gasoline expenditures gained 0.7% (-1.9% y/y). Adjusted for inflation, PCE gained 0.7% (2.9% y/y) and built on a 0.4% February rise.

The personal savings rate declined to 3.8% from a downwardly revised 4.2%. Except for an aberrant slump late in 2012, the savings rate was its lowest since September 2008. The total amount of personal saving fell 7.9% (-9.3% y/y) and has been trending lower since 2009.

Personal income rose an expected 0.5% (3.3% y/y) during March following a 0.4% February increase, revised from 0.3%. Disposable personal income also increased 0.5% (3.3% y/y). Wages & salaries jumped 0.6% (3.7% y/y), the strongest gain since November. Social Security payments increased 1.0% (4.4% y/y) while rental incomes gained 0.8% (5.2% y/y). Proprietors' income improved 0.7% (0.6% y/y). Also strong was dividend income which posted a 1.0% rise (6.1% y/y), but interest income slipped 0.1% (+3.2% y/y). Government unemployment insurance benefits again were quite weak and fell 2.6% (-43.0% y/y). Adjusted for price inflation, disposable personal income improved 0.3% (2.2% y/y) for the third straight month.

The PCE chain price index increased 0.2% (1.1% y/y) following two months of 0.1% gain. The price index excluding food & energy also rose 0.2% (1.2% y/y) after eight straight months of 0.1% gain. Durable goods prices slipped 0.1% (-2.2% y/y) while nondurable goods prices also eased by 0.1% (+0.1% y/y). Prices for services gained 0.3% (2.1% 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 (%) Mar Feb Jan Y/Y 2013 2012 2011
Personal Income 0.5 0.4 0.4 3.4 2.8 4.2 6.1
  Wages & Salaries 0.6 0.3 0.4 3.7 3.1 4.3 4.1
Disposable Personal Income 0.5 0.4 0.4 3.3 1.9 3.9 4.8
Personal Consumption Expenditures 0.9 0.5 0.2 4.0 3.1 4.1 5.0
Personal Saving Rate 3.8 4.2 4.3 4.3
(Mar '13)
4.5 5.6 5.7
PCE Chain Price Index 0.2 0.1 0.1 1.1 1.1 1.8 2.4
  Less Food & Energy 0.2 0.1 0.1 1.2 1.2 1.8 1.4
Real Disposable Income 0.3 0.3 0.3 2.2 0.7 2.0 2.4
Real Personal Consumption Expenditures 0.7 0.4 0.1 2.9 2.0 2.2 2.5
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