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Economy in Brief

U.S. Personal Spending Growth Eases as Savings Are Rebuilt
by Tom Moeller  March 1, 2018

Individuals felt the need to bolster savings account balances and pared back spending during January. Additions to savings were aided by tax cuts.

Personal consumption expenditures gained 0.2% (4.4% y/y) during January following an unrevised 0.4% December rise. It was the smallest monthly increase since August. The gain matched expectations in the Action Economics Forecast Survey. Adjusted for price inflation, personal spending eased 0.1% (+2.7% y/y) after a 0.2% rise. Real durable goods purchases retreated 1.6% (+7.1% y/y) after a 0.6% gain. Motor vehicle buying decreased 3.1% (+4.7% y/y) after a 1.8% rise. Real spending on home furnishings & appliances fell 0.6% (+8.2% y/y) following a 0.1% dip. Real spending on recreational goods & vehicles fell 0.7% (+10.3% y/y) following strong gains in the two prior months. Constant dollar spending on nondurable items held steady (+2.9% y/y) after a 0.4% decline. Real purchases of clothing & footwear retreated 1.2% (+3.5% y/y), off for the second straight month. Real spending on food & beverages eased 0.1% (+2.8% y/y) following a 0.3% rise. Real spending on gasoline & oil rose 2.0% (2.0% y/y) and reversed the December fall. Real spending on services ticked 0.1% higher (2.0% y/y), the weakest gain in three months. Real recreation spending dropped 1.4% (-0.3% y/y) after a 0.2% rise. Real health care outlays eased slightly (+2.4% y/y) following a 0.2% increase, while housing & utilities expenditures slipped 0.1% (+2.0% y/y) after a 0.6% strengthening.

The personal savings rate increased to 3.2%, the highest level since August. That was up from December's roughly twelve-year low of 2.5%.

The vehicle for raising savings was lower tax payments, as well as bonus income, which helped raise disposable income by 0.9% (4.0% y/y) after a 0.4% gain. Adjusted for price changes, take-home pay improved 0.6% (2.3% y/y) after a 0.2% rise.

Personal income rose 0.4% (3.8% y/y) for a second consecutive month. A 0.3% rise had been expected. Wages & salaries rose 0.5% (4.6% y/y) following a 0.4% increase. Rental income also rose 0.5% (5.8% y/y) after a 0.4% rise. Proprietors' income gained 0.2% (2.1% y/y) following a 0.2% decline. Interest income fell 0.4% (+3.8% y/y) after three straight months of 1.3% increase. Dividend income fell 0.4% (+2.7% y/y), down for the third straight month. Personal transfer receipts jumped 1.3% (3.1% y/y), the strongest rise in twelve months. Social Security payments surged 2.5% (5.0% y/y), also the strongest rise since January 2017. Medicare payments ticked 0.1% higher (2.7% y/y) and veterans benefits strengthened 2.9% (8.4% y/) after declines in two of the prior three months. Unemployment insurance benefits rose 1.1% (-7.8% y/y) following no change in December.

The PCE chain-type price index strengthened 0.4% (1.7% y/y), the largest rise since September. Excluding food & energy, prices increased 0.3% (1.5% y/y), the strongest rise in twelve months. Nondurable goods prices jumped 1.0% (1.4% y/y) as gasoline & energy prices strengthened 5.7% (8.9% y/y). That followed a 0.6% dip. Durable goods prices ticked 0.1% higher (-2.3% y/y), the first increase in twelve months. The price index for recreational goods & vehicles rose 0.3% (-3.2% y/y) while motor vehicle costs slipped 0.1% (-1.5% y/y). Clothing & footwear prices rose 2.0% (-0.8% y/y) following four straight months of decline. Services prices improved 0.2% (2.4% y/y) for a third straight month. Health care costs rose 0.6% (2.0% y/y) following two months of little change.

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.

Personal Income & Outlays (%) Jan Dec Nov Jan Y/Y 2017 2016 2015
Personal Income 0.4 0.4 0.3 3.8 3.1 2.4 5.0
  Wages & Salaries 0.5 0.4 0.5 4.6 3.3 2.9 5.1
Disposable Personal Income 0.9 0.4 0.3 4.0 2.9 2.6 4.5
Personal Consumption Expenditures 0.2 0.4 0.7 4.4 4.5 4.0 3.9
Personal Saving Rate 3.2 2.5 2.6 3.7
(Jan.'17)
3.4 4.9 6.1
PCE Chain Price Index 0.4 0.1 0.2 1.7 1.7 1.2 0.3
  Less Food & Energy 0.3 0.2 0.1 1.5 1.5 1.8 1.3
Real Disposable Income 0.6 0.2 0.1 2.3 1.2 1.4 4.2
Real Personal Consumption Expenditures -0.1 0.2 0.5 2.7 2.8 2.7 3.6
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