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Economy in Brief

U.S. Personal Spending Dips As Savings Increase
by Tom Moeller  August 29, 2014

Personal consumption expenditures edged 0.1% lower last month (+3.6% y/y) following an unrevised 0.4% June increase. It was the first decline in six months. A 0.2% rise had been expected in the Action Economics Forecast Survey. When adjusted for price inflation, spending was off 0.2% (+2.0% y/y). Real spending on motor vehicles led last month's decline with a 2.0% drop (+6.7% y/y) following two months of strong increase. Home furnishings outlays gained 0.3% (5.5% y/y) after a 0.1% rise and spending on recreational goods jumped 0.6% (8.0% y/y) after a 0.7% increase. To the downside, real nondurables spending fell 0.2% (+1.1% y/y), the second month of decline in three. Real spending on gasoline was off 1.0% (-1.5% y/y), the fifth monthly decline this year. Food & beverages spending fell 0.2% (+0.2% y/y) but apparel spending ticked up 0.1% (-0.2% y/y) after two months of decline. Real spending on services edged 0.1% lower (+1.7% y/y) and has been roughly unchanged all year. Continuing strong were financial services outlays, up 0.5% (3.7% y/y), and spending at restaurants & hotels, up 0.1% (3.3% y/y). Housing & utilities outlays fell 0.7% (+0.3% y/y) and health care outlays remained steady (1.3% y/y), ticking 0.2% lower since December.

The personal saving rate improved to 5.7%, the highest level since the end of 2012. The amount of saving in July increased 4.2% (15.7% y/y).

Personal income notched 0.2% higher during July (4.3% y/y) following a 0.5% June rise, revised from 0.4%. It was the weakest gain this year. Consensus expectations were for a 0.3% rise. Wages & salaries rose 0.2% (5.3% y/y) following two months of 0.4% increase. Proprietors' income declined 0.2% (+3.9% y/y) following a 0.9% jump. Rental income increased 0.9% (7.6% y/y) after two 0.6% increases. Earnings from dividends rose 0.4% (2.6% y/y) but interest income slipped 0.1% (+0.9% y/y), after three months of 0.4% increase. Transfer payments improved 0.3% and were up 4.6% y/y. The gain was led by a 2.5% jump (8.0% y/y) in veterans benefits and a 1.4% surge (9.9% y/y) in Medicaid payments. Social security receipts slipped 0.1% (+4.3% y/y). Disposable personal income gained 0.1% (4.2% y/y) following three consecutive 0.5% increases. In real terms, disposable income ticked 0.1% higher (2.6% y/y) after three straight 0.3% increases.

The chain price index nudged 0.1% higher in July (1.6% y/y) after four 0.2% increases. Energy prices fell 0.4% (+2.4% y/y) but food prices gained 0.3% (2.0% y/y). Durable goods prices slipped 0.1% (-2.3% y/y) while nondurable prices increased 0.1% (1.5% y/y). Services prices were up 0.1% (2.2% y/y). Prices excluding food & energy edged 0.1% higher (1.5% y/y) for a second month.

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 (%) Jul Jun May Y/Y 2013 2012 2011
Personal Income 0.2 0.5 0.5 4.3 2.2 5.2 6.2
  Wages & Salaries 0.2 0.4 0.4 5.3 2.8 4.5 4.0
Disposable Personal Income 0.1 0.5 0.5 4.2 1.0 4.9 5.0
Personal Consumption Expenditures -0.1 0.4 0.3 3.6 3.6 3.7 4.8
Personal Saving Rate 5.7 5.4 5.4 5.1
(Jul '13)
4.9 7.2 6.0
PCE Chain Price Index 0.1 0.2 0.2 1.6 1.2 1.8 2.5
  Less Food & Energy 0.1 0.1 0.2 1.5 1.3 1.8 1.5
Real Disposable Income 0.1 0.3 0.3 2.6 -0.2 3.0 2.5
Real Personal Consumption Expenditures -0.2 0.2 0.1 2.0 2.4 1.8 2.3
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