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Economy in Brief

U.S. Personal Income Stays Strong While Spending Moderates, Pre-Coronavirus
by Tom Moeller  March 27, 2020

Personal income increased 0.6% (4.0% y/y) in February as it did in January. A 0.4% rise had been expected in the Action Economics Forecast Survey. Wages & salaries improved 0.5% (3.3% y/y) for a second month, reflecting strength in the employment situation before the coronavirus outbreak. Proprietors income surged 2.8% (7.8% y/y) following a 0.9% rise. Rental incomes rose a steady 0.4% (4.2% y/y) while receipts on assets eased 0.2% (+2.5% y/y) due to a 0.5% decline (+1.6% y/y) in personal interest income. Dividend income rose 0.2% (3.6% y/y). Transfer receipts improved 0.3% (5.4% y/y) after strengthening 1.6% in January.

Personal consumption expenditures rose 0.2% (4.9% y/y) in February, the same as in January. A 0.3% gain had been expected. In constant dollars, total spending edged 0.1% higher (3.0% y/y) for a third consecutive month. Real durable goods spending declined 0.7% (+7.8% y/y) during February after a 0.5% rise. Spending on motor vehicles declined 1.0% (+8.4% y/y) after edging lower for two months. Recreational goods & vehicles outlays fell 0.8% (+10.8% y/y) following a 2.1% rise. Spending on furniture & household equipment eased 0.7% (+5.4% y/y) after a 1.0% gain. Real nondurable goods buying improved 0.1% last month (3.1% y/y), the same as in January. Apparel spending dropped 1.0% (+3.5% y/y) after falling 1.5%. Real gasoline outlays rose a steady 0.7% (-1.2% y/y). Food & beverage purchases eased 0.3% (+2.9% y/y), off for the third straight month. Real spending on services improved 0.2% (2.3% y/y) after holding steady in January. The rise was bolstered by a 0.7% surge (1.1% y/y) in spending on housing & utilities after declining in three of the prior four months. Health care spending rose 0.2% (2.9% y/y) after no change while spending at restaurants & hotels weakened 0.9% (+2.0% y/y) after a 0.1% rise.

Disposable personal income rose 0.5% (4.0% y/y) last month after an unrevised 0.6% gain. Adjusted for price inflation, take-home pay increased 0.4% (2.2% y/y) after rising 0.5% in January.

Last month's strength in income relative to spending caused the personal savings rate to rise to 8.2%, the highest level since March of last year. The level of personal saving declined 3.2% y/y last month.

The PCE chain price index increased 0.1% in February (1.8% y/y) for the second consecutive month. The price index excluding food & energy rose a steady 0.2% (1.8% y/y). Motor vehicle prices edged 0.1% higher (-0.3% y/y) and home furnishings & appliance prices rose 0.7% (-0.7% y/y). Apparel costs strengthened 0.6% (-1.7% y/y) for a second straight month. Gasoline & oil prices fell 3.4% (+5.6% y/y). Services costs improved a steady 0.2% (2.5% y/y). Housing & utilities prices rose 0.2% (3.0% y/y) but health care prices eased 0.1% (+1.9% y/y). Energy prices were off 2.1% (+2.8% y/y) after a 0.7% decline. Food prices rose 0.4% (0.8% y/y) after increasing 0.3%.

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 AS1REP NA database

Personal Income & Outlays (%) Feb Jan Dec Feb Y/Y 2019 2018 2017
Personal Income 0.6 0.6 0.2 4.0 4.4 5.6 4.7
  Wages & Salaries 0.5 0.5 0.2 3.3 4.6 5.0 4.7
Disposable Personal Income 0.5 0.6 0.2 4.0 4.3 6.1 4.7
Personal Consumption Expenditures 0.2 0.2 0.4 4.9 4.0 5.2 4.4
Personal Saving Rate 8.2 7.9 7.5 8.8 (Feb '19) 7.9 7.7 7.0
PCE Chain Price Index 0.1 0.1 0.3 1.8 1.4 2.1 1.8
  Less Food & Energy 0.2 0.2 0.2 1.8 1.6 2.0 1.6
Real Disposable Income 0.4 0.5 -0.1 2.2 2.9 4.0 2.9
Real Personal Consumption Expenditures 0.1 0.1 0.1 3.0 2.6 3.0 2.6
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