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Economy in Brief

U.S. Personal Income Strengthens But Spending Moderates
by Tom Moeller  June 30, 2017

Personal income increased 0.4% during May (3.5% y/y) following a 0.3% April rise, revised from 0.4%. The gain outpaced expectations for a 0.3% advance in the Action Economics Forecast Survey. Wages & salaries ticked just 0.1% higher (2.9% y/y), the slowest rise since December, following a 0.5% gain. An outsized 4.8% gain (5.0% y/y) in dividend income offset this weakness as it followed a 0.4% rise. Rental income also was strong as it posted a 0.7% rise (6.8% y/y) for a second straight month. Proprietors' income gained 0.6% (4.6% y/y) and made up a 0.2% decline. Interest income declined 0.4% (+2.9% y/y) for a second straight month. Government transfer receipts ticked 0.1% higher (3.6% y/y) following no change. Medicaid payments increased 0.2% (5.4% y/y) and Medicare payments gained 0.4% (4.3% y/y) for a fourth straight month. Social security payments held steady (3.1% y/y), but unemployment insurance payments fell 2.2% (-12.5% y/y).

Personal consumption expenditures matched expectations as they ticked 0.1% higher (4.2% y/y) after two 0.4% gain. A 0.3% decline (+4.3% y/y) in durable goods purchases held back the increase following a 1.0% jump. Motor vehicle outlays declined 0.6% (+2.3% y/y), down for the fifth consecutive month. Spending on home furnishings and appliances fell 0.4% (+2.0% y/y) and reversed a 0.4% increase. Recreational goods & vehicle outlays were off 0.4% (+8.8% y/y), but rose 13.9% y/y when adjusted for lower prices. Nondurable goods outlays fell 0.5% (+3.2% y/y) after a 0.5% rise. Gasoline expenditures fell 4.8% (+4.5% y/y), but rose 1.2% (-1.0% y/y) when adjusted for lower prices. Clothing outlays eased 0.1% (-0.2% y/y) and food & beverage spending held steady (+3.2% y/y). Services outlays increased 0.3% (4.5% y/y) after a 0.2% rise. Housing & utilities spending rose 0.8% (4.9% y/y) while health care purchases rose 0.2% (3.9% y/y). Spending on recreation declined 1.1% (+5.5% y/y) after a 0.7% fall.

As the gain in income outpaced the rise in spending, the personal savings rate rose to 5.5%, is highest level since September. Personal saving rose 8.5% (-5.1% y/y).

In constant dollars, disposable income jumped 0.6% (2.2% y/y), the strongest increase since April 2015. Real personal spending gained 0.1% (2.7% y/y), the weakest increase in three months.

The chain price index declined 0.1% (+1.4% y/y) following a 0.2% rise. The index less food & energy rose 0.1% (1.4% y/y). The y/y increase compares to 1.8% three months ago. The nondurable goods price index was pulled 0.8% lower (+1.1 y/y) by a 3.0% decline (+5.3% y/y) in energy prices. The durable goods price index fell 0.2% (-2.5% y/y), the fourth consecutive monthly fall. The services price index improved 0.2% (2.2% y/y). The annual increase was down from 2.5% three months earlier.

The personal income & consumption figures are available in Haver's USECON database with detail in the USNA database. The Action Economics figure is in the AS1REPNA database.

An Update to the Budget and Economic Outlook: 2017 to 2027 from the Congressional Budget Office can be found here.

Personal Income & Outlays (%) May Apr Mar May Y/Y 2016 2015 2014
Personal Income 0.4 0.3 0.2 3.5 3.4 4.4 5.2
  Wages & Salaries 0.1 0.5 -0.0 2.9 3.9 5.1 5.1
Disposable Personal Income 0.5 0.3 0.2 3.7 3.7 3.8 5.1
Personal Consumption Expenditures 0.1 0.4 0.4 4.2 3.9 3.5 4.4
Personal Saving Rate 5.5 5.1 5.1 6.0
(May '16)
5.8 5.8 5.6
PCE Chain Price Index -0.1 0.2 -0.2 1.4 1.1 0.3 1.5
  Less Food & Energy 0.1 0.1 -0.1 1.4 1.7 1.4 1.6
Real Disposable Income 0.6 0.2 0.4 2.2 2.6 3.5 3.5
Real Personal Consumption Expenditures 0.1 0.2 0.6 2.7 2.7 3.2 2.9
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