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Economy in Brief

U.S. Personal Income Increase Continues to Outpace Spending
by Tom Moeller  March 2, 2015

Personal income rose an expected 0.3% during January (4.6% y/y) following an unrevised 0.3% December increase. The expectations figure is from the Consensus Economics Forecast Survey. Wages & salaries strengthened 0.6% (4.9% y/y) following a 0.1% uptick. Transfer payments surged 1.0% (5.9% y/y) as Medicaid payments strengthened 1.1% (11.8% y/y). These gains were offset by a 0.9% decline (+3.7% y/y) in proprietors income but rental income increased 0.3% (7.2% y/y). Dividend income ticked 0.1% higher (8.6% y/y) with improved corporate profitability. Interest income declined 0.5% and fell 1.0% y/y with lower interest rates.

Personal consumption expenditures declined 0.2% (+3.6% y/y) following an unrevised 0.3% decline. Personal spending has fallen at a 0.1% annual rate during the last three months. The latest decline outpaced expectations for a 0.1% slip. The PCE chain price index fell 0.5% (+0.2% y/y) following two months of 0.2% decline. As a result, the y/y gain of 0.2% was the weakest since October 2009.

Real disposable income increased 0.9% (4.2% y/y) following two months of 0.5% rise. Real personal spending gained 0.3% (3.4% y/y) after a 0.1% slip.

In constant dollars, motor vehicles and parts purchases fell 0.2% last month (+10.6% y/y) following a 3.1% December drop. Furnishings & appliance spending improved 0.3% (9.2% y/y) after a 0.7% rise. Recreational goods & vehicles purchases improved 0.2%, but by an outsized 12.9% y/y. Apparel purchases countered some of this strength with a 0.6% drop (4.7% y/y) after a 0.8% decline. Real services purchases increased 0.4% (2.5% y/y) after a 0.1% uptick.  Spending on restaurants and hotels remained strong and posted a 0.3% rise (6.2% y/y) after a 1.2% jump.

The strength in income accompanied by the weakness in spending lifted the personal savings rate to 5.5%, the highest level since December 2012. Personal saving rose 18.0% during the last twelve months.

The 0.5% decline in the chain price index reflected a 10.4% drop (-21.2% y/y) in energy prices while food prices edged 0.2% lower (+2.7% y/y). Durable goods prices were off 0.3% (-2.8% y/y) and nondurable goods prices fell 2.3% (-3.7% y/y) with lower gasoline costs. Services prices ticked 0.1% higher (2.0% y/y) for the second straight month. The price index excluding food & energy edged up 0.1% m/m (1.3% y/y) following no change.

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 (%) Jan Dec Nov Y/Y 2014 2013 2012
Personal Income 0.3 0.3 0.4 4.6 4.0 2.0 5.2
  Wages & Salaries 0.6 0.1 0.8 4.9 4.5 2.8 4.5
Disposable Personal Income 0.4 0.3 0.3 4.4 3.9 1.0 4.9
Personal Consumption Expenditures -0.2 -0.3 0.4 3.6 3.9 3.6 3.7
Personal Saving Rate 5.5 5.0 4.5 4.9
(Jan '14)
4.9 4.9 7.2
PCE Chain Price Index -0.5 -0.2 -0.2 0.2 1.3 1.2 1.8
  Less Food & Energy 0.1 0.0 0.1 1.3 1.4 1.3 1.8
Real Disposable Income 0.9 0.5 0.5 4.2 2.5 -0.2 3.0
Real Personal Consumption Expenditures 0.3 -0.1 0.6 3.4 2.5 2.4 1.8
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