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Economy in Brief

U.S. Personal Income & Spending Extend Moderate Gains; Price Inflation Eases a Bit in June
by Carol Stone  August 1, 2014

Personal income increased 0.4% during June (3.9% y/y) after a 0.4% rise in May. Consensus expectations had anticipated a 0.4% gain. Wages & salaries were also up 0.4% in both May and June (4.9% y/y). Proprietors' income was also up 0.4% (3.5% y/y) after no change in May. Rental incomes increased 0.6% for a third straight month, producing 7.4% growth year-on-year. Earnings from assets picked up to 0.6% in June (1.2% y/y) from 0.4% in May, led by a 1.0% gain in dividend income (2.2% y/y); interest income increased 0.3% for a third month (0.5% y/y). Transfer payments rose just 0.2% in June but were up 4.0% y/y. Disposable personal income gained 0.4% (3.9% y/y) for a third consecutive month. In real terms, disposable income was up rose 0.2% (2.3% y/y) for a third straight month. Annual revisions had little overall impact. Dividends were revised noticeably higher in 2012, but then fell back in the same pattern previously reported in 2013.

Personal consumption expenditures rose 0.4% (4.0% y/y) following 0.3% in May, revised from 0.2% and a 0.1% rise in April, which was revised from no change in the previous report. A 0.4% rise had been expected in the Action Economics Forecast Survey. When adjusted for price inflation, spending increased 0.2% (+2.3% y/y), with modest upward revisions to both May and April, so there is now continuous positive movement instead of the decreases previously shown in those two months. Nominal spending was pushed by energy; that category of goods and services outlays increased 1.7% in June (2.7% y/y); the entire amount was absorbed by prices so real spending on energy was flat in the month. Outlays for durable goods rose 0.5% in the month (4.4% y/y) and for services, just 0.2% (3.9% y/y).

Total PCE inflation eased to 0.2% in June (1.6% y/y) despite the energy price surge. Food prices and durable goods prices were flat and services prices ticked up just 0.1%, making the offset. Total inflation ex food & energy also was just 0.1% (1.5% y/y), down from 0.2% in May.

The similar increases in personal income and spending in June were reflected in a personal saving rate of 5.3%, the same as in May and up marginally from 5.2% in April. This is also the same level as in June 2013. The amount of saving in June 2014 was flat with May and up 4.4% from a year ago. Annual revisions lifted the saving rate beginning in 2011, likely reflecting the larger amount of dividend income, which is about 4% higher than reported before.

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 (%) Jun May Apr Y/Y 2013 2012 2011
Personal Income 0.4 0.4 0.3 3.9 2.2 5.2 6.2
  Wages & Salaries 0.4 0.4 0.2 4.9 2.8 4.5 4.0
Disposable Personal Income 0.4 0.4 0.4 3.9 1.0 4.9 5.0
Personal Consumption Expenditures 0.4 0.3 0.1 4.0 3.6 3.7 4.8
Personal Saving Rate 5.3 5.3 5.2 5.3
(Jun '13)
4.9 7.2 6.0
PCE Chain Price Index 0.2 0.3 0.2 1.6 1.2 1.8 2.5
  Less Food & Energy 0.1 0.2 0.2 1.5 1.3 1.8 1.5
Real Disposable Income 0.2 0.2 0.2 2.3 -0.2 3.0 2.5
Real Personal Consumption Expenditures 0.2 0.1 -0.1 2.3 2.4 1.8 2.3
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