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Economy in Brief

U.S. Personal Income Increase Continues to Outpace Spending
by Tom Moeller  March 30, 2015

Personal income rose 0.4% during February (4.5% y/y) following a revised 0.4% January increase, last month reported as 0.3%. Expectations had been for a 0.3% rise in the Consensus Economics Forecast Survey. Wages & salaries improved 0.3% (4.5% y/y) following a 0.6% jump. Transfer payments firmed 0.6% (5.9% y/y) as Medicaid payments surged 1.5% (11.7% y/y), roughly the same as in January. These gains were offset by a 0.5% decline (+3.0% y/y) in proprietors income, off sharply for the third month in the last four, but rental income increased 0.6% (6.9% y/y). Dividend income jumped 2.8% (11.0% y/y) with improved corporate profitability but interest income continued 0.5% lower (-1.2% y/y). Disposable income gained 0.4% (4.3% y/y) after a 0.5% jump, revised from 0.4%.

Personal consumption expenditures nudged 0.1% higher (+3.3% y/y) following two consecutive monthly declines. The increase disappointed expectations for a 0.2% rise. The PCE chain price index improved 0.2% (0.3% y/y), the first rise in four months.

Real disposable income increased 0.2% (4.0% y/y) after a 0.9% rise. Real personal spending slipped 0.1% (+3.0% y/y) after a 0.2% gain.

In constant dollars, motor vehicles and parts purchases fell 2.8% last month (+8.6% y/y) following a 1.1% jump. Furnishings & appliance spending slipped 0.1% (+8.0% y/y) after a 0.5% rise. Recreational goods & vehicles purchases also edged 0.1% lower but remained up 9.3% y/y. Apparel purchases slipped 0.1% as well (+3.8% y/y), the third consecutive monthly shortfall. Real services purchases ticked 0.1% higher (2.6% y/y) after two months of 0.2% rise. Spending on restaurants and hotels retrenched by 0.5% (+4.3% y/y) for the second straight month.

The strength in income accompanied by the weakness in spending continued to lift the personal savings rate, last month to 5.8%, the highest level since December 2012. Personal saving rose 20.4% during the last twelve months.

The 0.2% rise (0.3% y/y) in the chain price index was the first gain in the last five months. Energy prices rose 1.0% (-19.9% y/y), the first increase since June as gasoline prices gained 2.2% (-32.0% y/y). Food prices improved 0.1% (2.6% y/y). Durable goods prices rose 0.1% (-2.6% y/y) while nondurable goods prices rose 0.4% (-3.4% y/y). Services prices ticked 0.1% higher (2.1% y/y) after a 0.2% rise. The price index excluding food & energy edged up 0.1% (1.4% y/y), about the same as during the last eight months.

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 (%) Feb Jan Dec Y/Y 2014 2013 2012
Personal Income 0.4 0.4 0.3 4.5 4.0 2.0 5.2
  Wages & Salaries 0.3 0.6 0.1 4.5 4.5 2.8 4.5
Disposable Personal Income 0.4 0.5 0.3 4.3 3.8 1.0 4.9
Personal Consumption Expenditures 0.1 -0.2 -0.2 3.3 3.9 3.6 3.7
Personal Saving Rate 5.8 5.5 4.9 5.0
(Feb '14)
4.9 4.9 7.2
PCE Chain Price Index 0.2 -0.4 -0.2 0.3 1.3 1.2 1.8
  Less Food & Energy 0.1 0.1 0.0 1.4 1.4 1.3 1.8
Real Disposable Income 0.2 0.9 0.5 4.0 2.5 -0.2 3.0
Real Personal Consumption Expenditures -0.1 0.2 0.1 3.0 2.5 2.4 1.8
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