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Economy in Brief

U.S. Personal Spending Weakens as Price Inflation Picks Up
by Tom Moeller  May 31, 2019

Personal consumption expenditures increased 0.3% (4.3% y/y) during April following a 1.1% March gain, revised from 0.9%. A 0.2% increase had been expected in the Action Economics Forecast Survey. Nondurable goods spending strengthened 0.7% (3.8% y/y) reflecting a 6.7% rise (4.6% y/y) in spending on gasoline & other energy products. Apparel purchases held steady (2.2% y/y) after strengthening 1.3%, and spending at restaurants edged 0.1% higher (2.2% y/y) following a 1.0% rise. Outlays on services rose 0.3% (4.9% y/y) on the heels of a 0.6% surge. Recreation services spending rose 0.2% (3.3% y/y) following a 1.9% surge. Housing & utilities outlays inched 0.1% higher (4.0% y/y) following three months of strong increase. Health care spending rose a weakened 0.4% (4.8% y/y) and outlays on transportation services rose 0.3% (4.1% y/y), the same as in March. Spending on durable goods offset these gains with a 0.8% decline (+1.0% y/y) following a 3.6% surge. Spending on motor vehicle & parts weakened 2.0% (-0.3% y/y) following a 9.2% jump (1.8% y/y). Outlays on autos have declined in four of the last five months. Spending on home furnishings & appliances eased 0.1% (+1.1% y/y) after a 0.9% rise. Recreational goods & vehicle outlays fell 0.2% (+3.3% y/y) after a 0.8% rise.

The PCE chain price index rose 0.3% (1.5% y/y), the strongest increase since January of last year. The price index excluding food & energy increased 0.2% (1.6% y/y), the largest rise since December. Nondurable product prices jumped 0.5% (0.2% y/y) as fuel prices surged 5.1% (3.2% y/y), strong for a second straight month. This strength was offset by a 0.9% decline (-3.6% y/y) in the clothing & footwear price index. Food & beverage prices also were off by 0.3% (+0.8% y/y). The services price index rose 0.4% (2.4% y/y), equaling the strongest monthly rise in roughly ten years. Both transportation services and finance & insurance costs jumped 1.2% and 2.7% y/y. Recreation services prices strengthened 0.4% (2.8% y/y). Housing & utilities prices rose a steady 0.3% (3.1% y/y) but the health care price index inched just 0.1% higher (1.4% y/y) for a second straight month. A 0.4% decline (-1.8% y/y) in the durable goods price index offset some of these strong price gains, extending many years of price declines across most durable product categories.

Personal income increased 0.5% (3.9% y/y) following an unrevised 0.1% rise. The 3.9% y/y gain was below growth during 2018 and 2017. A 0.3% increase had been expected. Wages & salaries increased 0.3% but y/y growth of 3.6% remained below the 5.1% high in August 2017. Proprietors income held steady (2.3% y/y) after three straight months of decline. Rental income improved 0.2% (5.4% y/y) after three consecutive months of strong increase. Receipts on assets jumped 1.6% (2.6% y/y). A 2.3% gain (1.6% y/y) in interest income accompanied a 0.7% rise (4.0% y/y) in dividend earnings. Personal transfer receipts increased 0.6% (7.2% y/y) for the third straight month. Medicare receipts surged another 0.9% (10.6% y/y). Income from Social Security rose 0.2% (6.4% y/y), and Medicaid receipts strengthened 1.4% (5.4% y/y). Jobless insurance income declined 4.0% (-8.4% y/y) after a 0.8% drop.

In constant dollars, personal spending held steady m/m (2.7% y/y) following a 0.9% jump. Real personal disposable income rose 0.1% (2.2% y/y) after a 0.2% decline.

The strength in spending held the personal savings rate at 6.2%, below December's 7.4% high. The level of personal savings fell 5.9% 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 (%) Apr Mar Feb Apr Y/Y 2018 2017 2016
Personal Income 0.5 0.1 0.2 3.9 4.4 4.4 2.6
  Wages & Salaries 0.3 0.4 0.3 3.6 4.3 4.6 2.9
Disposable Personal Income 0.4 0.1 0.2 3.8 4.9 4.4 2.8
Personal Consumption Expenditures 0.3 1.1 -0.0 4.3 4.7 4.3 3.8
Personal Saving Rate 6.2 6.1 7.0 6.8 (Apr.'18) 6.7 6.7 6.7
PCE Chain Price Index 0.3 0.2 0.1 1.5 2.0 1.8 1.1
  Less Food & Energy 0.2 0.1 0.0 1.6 1.9 1.6 1.7
Real Disposable Income 0.1 -0.2 0.1 2.2 2.8 2.6 1.7
Real Personal Consumption Expenditures -0.0 0.9 -0.1 2.7 2.6 2.5 2.7
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