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Economy in Brief

U.S. Personal Spending Picks Up as Savings Rate Tumbles
by Tom Moeller  April 29, 2019

Consumer spending strengthened during March at the expense of savings account balances. Personal consumption expenditures surged 0.9% (4.4% y/y) following a 0.1% February uptick and a 0.3% January rise, revised from 0.1%. It was the largest monthly increase since August 2009, just after the end of the recession. A 0.7% increase had been expected in the Action Economics Forecast Survey. A 1.7% surge (2.9% y/y) in spending on goods was driven by a 2.3% gain (1.7% y/y) in durable goods outlays. Spending on motor vehicle & parts jumped 4.8% (-1.2% y/y) following three straight months of sharp decline. Spending on home furnishings & appliances increased 1.1% (3.0% y/y) and recreational goods & vehicle outlays jumped 1.0% (4.3% y/y). Both of these latter two changes came after 0.4% shortfalls. Nondurable goods spending surged 1.4% (3.5% y/y) reflecting a 4.4% strengthening (-0.3% y/y) in spending on gasoline & other energy products. Apparel purchases rose 1.2% (2.8% y/y) after a 0.8% decline, and spending at restaurants gained 0.8% (2.1% y/y) following a 1.3% drop. Outlays on services strengthened 0.5% (5.1% y/y), the most since October. Recreation services spending jumped 1.5% (3.0% y/y) following declines in three of the prior four months. Housing & utilities outlays rose 0.7% (4.7% y/y) for a second consecutive month while health care spending rose 0.5% (4.4% y/y), the same as in the  prior month.

This strength in spending came at the expense of the personal savings rate which fell to 6.5% from 7.3%. It was down from December's high of 7.7% and the lowest rate since November. The level of personal savings fell 6.2% y/y.

Personal income edged 0.1% higher last month after a 0.2% rise. The 3.8% y/y gain was the weakest since January 2017. A 0.3% increase had been expected. Wages & salaries increased a firm 0.4% but y/y growth of 4.2% was below the 5.1% high in August 2017. Proprietors income fell 1.2% (+1.9% y/y), down for the third straight month. Rental income improved 1.0% (4.6% y/y), about the same as in the prior two months. Receipts on assets fell 0.8% (+1.4% y/y), down for the third straight month. Interest income was off 1.3% (0.0% y/y), the same as in the prior two months, and dividend earnings eased 0.2% (+3.4% y/y). Personal transfer receipts increased 0.4% (6.7% y/y) for a second straight month. Medicare receipts surged 0.9% (10.2% y/y). Income from Social Security rose 0.3% (6.1% y/y, but Medicaid income edged just 0.1% higher (2.5% y/y) while jobless insurance income declined 0.8% (-7.0% y/y), the first decline since October.

The chain price index rose 0.2% (1.5% y/y) after edging 0.1% higher in February. The price index excluding food & energy held steady (1.6% y/y) following two months of 0.1% gain. The durable goods price index fell 0.5% (-1.4% y/y) after a 0.3% drop due to shortfalls across durable product categories. Nondurable product prices jumped 0.6% (0.3% y/y) as fuel prices surged 6.1% (1.1% y/y). This strength was offset by a 2.1% decline (-2.2% y/y) in the clothing & footwear price index. The services price index rose 0.2% (2.3% y/y) for a second straight month. Recreation services prices strengthened 0.6% (2.2% y/y), but transportation services eased 0.2% (+1.6% y/y), down for the fourth consecutive month. Housing & utilities prices rose 0.3% (3.0% y/y) but the health care price index held steady (1.4% y/y).

In constant dollars, personal spending increased 0.7% (2.9% y/y) and personal disposable income declined 0.2% (+2.3% y/y).

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

Personal Income & Outlays (%) Mar Feb Jan Y/Y 2018 2017 2016
Personal Income 0.1 0.2 -0.1 3.8 4.5 4.4 2.6
  Wages & Salaries 0.4 0.3 0.4 4.2 4.5 4.6 2.9
Disposable Personal Income 0.0 0.1 -0.2 3.9 5.0 4.4 2.8
Personal Consumption Expenditures 0.9 0.1 0.3 4.4 4.7 4.3 3.8
Personal Saving Rate 6.5 7.3 7.2 7.2 (Mar '18) 6.8 6.7 6.7
PCE Chain Price Index 0.2 0.1 -0.0 1.5 2.0 1.8 1.1
  Less Food & Energy 0.0 0.1 0.1 1.6 1.9 1.6 1.7
Real Disposable Income -0.2 0.0 -0.2 2.3 2.9 2.6 1.7
Real Personal Consumption Expenditures 0.7 -0.0 0.4 2.9 2.6 2.5 2.7
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