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Economy in Brief

U.S. Consumer Spending Posts Firm Rise As Income Improves
by Tom Moeller  September 29, 2014

Personal consumption expenditures increased 0.5% during August (4.1% y/y) following an unchanged July reading, revised from -0.1%. The rise matched the strongest gain since a 0.8% March increase. A 0.4% increase had been expected in the Action Economics Forecast Survey. When adjusted for price inflation, spending increased 0.5% (-2.6% y/y) following no change during July. Purchases of durable goods were quite strong. Real spending on motor vehicles led last month's spending with a 3.9% increase (10.2% y/y). That was accompanied by a 1.2% rise (6.1% y/y) in real consumption of home furnishings & appliances. Constant dollar spending on recreational vehicles gained 1.0% (9.2% y/y). Apparel spending rose 0.4% (2.0% y/y) in real terms and gasoline purchases improved 0.6% (0.8% y/y). Services spending rose 0.4% (1.8% y/y) in real terms as health care spending was unchanged (2.1% y/y) but recreation services jumped 2.0% (-1.1% y/y).

All this spending caused the personal saving rate to dip m/m to 5.4%, but that still was nearly the highest level since the end of 2012. The amount of personal saving declined 3.4% (+6.4% y/y) after a 3.0% July increase.

Personal income rose a modest 0.3% (4.3% y/y) following an unrevised 0.2% increase. The increase matched Consensus expectations. Wages & salaries rose 0.4% (5.1% y/y), the firmest gain in three months. Rental income jumped 1.0% (7.6% y/y) after a 0.8% rise. Proprietors' income declined 0.6% (+3.1% y/y). Earnings from dividends rose 0.3% (2.7% y/y) but interest income slipped 0.2% (+0.9% y/y) for the second straight month. Transfer payments improved 0.7% (5.2% y/y) following a 0.4% rise. The gain was led by a 2.0% jump (12.5% y/y) in Medicaid payments. Social security receipts increased 0.5% (4.3% y/y) but unemployment insurance benefits were unchanged (-35.7% y/y). Disposable personal income gained 0.3% (4.2% y/y) after a 0.2% improvement. In real terms, disposable income moved 0.3% higher (2.7% y/y), improving on a 0.1% uptick.

The chain price index was virtually unchanged in August (1.5% y/y) after a 0.1% uptick. Energy prices declined 2.7% (0.0% y/y) but food prices gained 0.3% (2.2% y/y) for a second straight month. Durable goods prices declined 0.2% (-2.2% y/y) while nondurable prices moved 0.6% lower (+0.8% y/y). Services prices increased 0.2% (2.3% 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 (%) Aug Jul Jun Y/Y 2013 2012 2011
Personal Income 0.3 0.2 0.5 4.3 2.2 5.2 6.2
  Wages & Salaries 0.4 0.2 0.3 5.1 2.8 4.5 4.0
Disposable Personal Income 0.3 0.2 0.5 4.2 1.0 4.9 5.0
Personal Consumption Expenditures 0.5 0.0 0.5 4.1 3.6 3.7 4.8
Personal Saving Rate 5.4 5.6 5.4 5.3
(Aug '13)
4.9 7.2 6.0
PCE Chain Price Index -0.0 0.1 0.2 1.5 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 0.3 0.1 0.3 2.7 -0.2 3.0 2.5
Real Personal Consumption Expenditures 0.5 -0.1 0.3 2.6 2.4 1.8 2.3
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