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Economy in Brief

U.S. Consumer Spending Logs Expected Decline; Savings Rate Firms
by Tom Moeller  February 2, 2015

Personal consumption expenditures declined 0.3% during December following little-revised readings of 0.5% and 0.3% during the prior two months. The figure matched expectations in the Action Economics Forecast Survey. For the full year, spending rose 3.9%, its largest gain in three years. Lower prices provided an impetus for personal spending. The PCE chain price index fell 0.2% during each of the last two months following no change in October. As a result, the y/y change of 0.7% was the weakest since 2009.

Motor vehicles and parts purchases fell 2.0% last month (+12.0% y/y) in constant dollars but that followed a 4.9% November surge. Furnishings & appliance spending slipped 0.2% (+6.9% y/y) on the heels of a 1.3% jump. Recreational goods & vehicles purchases rose 0.2%, but by an outsized 12.0% y/y. Apparel purchases gained 0.5% last month (5.9% y/y) after a 3.2% jump. Real services purchases were unchanged (2.0% y/y) following two months of 0.3% increase, though spending on restaurants and hotels gained 0.9% (4.3% y/y) for the second month in the last three.

Despite all this spending, the personal savings rate suffered little deterioration last year. The full-year rate of 4.8% compared to 4.9% in 2013, and the December rate edged back to 4.9%. Personal saving rose 2.8% during the year.

Personal income rose an expected 0.3% during December (4.6% y/y) following a like gain in November. For all of last year, income rose 3.9%, roughly double the 2013 rise. Wages & salaries inched up 0.1% (4.8% y/y) but that followed a 0.6% rise. During all of last year, wages increased 4.3% after a 2.8% gain in 2013. Rental income gained 0.8% (7.6% y/y) pulling the full year rise to 7.5%. Proprietors income rose 0.9% (5.3% y/y) and dividend income gained 0.4% (8.0% y/y) with improved corporate profitability. Interest income slipped 0.2% and fell 1.0% y/y with lower interest rates. Personal transfer receipts increased 0.5% (5.6% y/y) rounding out a 4.4% rise during all of 2014, the strongest rise in four years.

The 0.2% decline in the chain price index reflected a 5.2% drop (-11.9% y/y) in energy prices while food prices rose 0.2% (3.0% y/y). Durable goods prices were off 0.5% (-2.8% y/y) and nondurable goods prices fell 1.2% (-1.6% y/y) with lower gasoline costs. Services prices ticked 0.1% higher (2.1% y/y). The price index excluding food & energy was flat m/m for the second straight month and up 1.3% y/y.

The personal income & consumption figures are available in Haver's USECON database with detail in the USNA database. The consensus expectation figures are in the AS1REPNA database.

Personal Income & Outlays (%) Dec Nov Oct Y/Y 2014 2013 2012
Personal Income 0.3 0.3 0.4 4.6 3.9 2.0 5.2
  Wages & Salaries 0.1 0.6 0.3 4.8 4.3 2.8 4.5
Disposable Personal Income 0.3 0.3 0.4 4.5 3.8 1.0 4.9
Personal Consumption Expenditures -0.3 0.5 0.3 3.6 3.9 3.6 3.7
Personal Saving Rate 4.9 4.3 4.5 4.1
(Dec '13)
4.8 4.9 7.2
PCE Chain Price Index -0.2 -0.2 0.0 0.7 1.3 1.2 1.8
  Less Food & Energy 0.0 0.0 0.2 1.3 1.4 1.3 1.8
Real Disposable Income 0.5 0.4 0.3 3.7 2.4 -0.2 3.0
Real Personal Consumption Expenditures -0.1 0.7 0.3 2.8 2.5 2.4 1.8
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