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Economy in Brief

U.S. Personal Income Falls Sharply While Spending Increases in August
by Tom Moeller  October 1, 2020

• Income decline due to lower unemployment insurance payments.

• Spending continues to strengthen.

• Price inflation eases.

Personal income declined 2.7% during August (+4.7% y/y) following a 0.5% July rise, revised from 0.4%. A 2.1% drop had been expected in the Action Economics Forecast Survey. A 52.0% decline in unemployment insurance benefits accounted for the outsized decline as it followed a 6.0% July shortfall. Wages & salaries rose 1.3% (-0.5% y/y), strong for the for the fourth consecutive month but they eased 0.5% y/y. Proprietors jumped 2.7% (-1.4% y/y) and rental income strengthened 1.2% (2.7% y/y). Disposable personal income declined 3.2% (+5.4% y/y) in August. Adjusted for price inflation, take-home pay decreased 3.5% (+4.0% y/y) following a 0.3% rise.

Personal consumption expenditures increased 1.0% last month (-1.9% y/y) after rising 1.5% in July, revised from 1.9%. A 0.8% increase had been expected. Adjusted for price inflation, spending improved 0.7% but remained down 3.2% y/y. Real spending on durable goods held steady (11.2% y/y) following three consecutive months of strong increase. Spending on motor vehicles increased 0.8% (7.0% y/y) while home furnishings purchases fell 1.5% (+8.0% y/y). Purchases of recreational goods eased 0.5% (+21.3% y/y), about the same as in July. Real spending on nondurable goods slipped 0.3% (+3.0% y/y) last month as clothing purchases dropped 0.6% (-3.7% y/y) after falling 1.6% in July. Spending on services rose 1.1% (-7.2% y/y) last month after rising 1.3%. Spending at hotels and restaurants rose 6.7% (-17.9% y/y), strong for the fourth straight month. Spending on recreation rose 3.6% but was off roughly one-third y/y. Transportation services outlays rose 2.4% (-22.6% y/y).

Last month's rise in spending relative to income lowered the personal saving rate to 14.1% from 17.7% in July. The rate reached a record high 33.6% in April. The level of personal saving increased 103.8% y/y.

The PCE chain price index increased 0.3% (1.4% y/y) in August following an upwardly revised 0.4% July rise. The price index excluding food and energy also rose 0.3% (1.6% y/y) after an upwardly revised 0.4% increase in July. Energy prices increased 0.8% (-9.4% y/y), strong for the third straight month. Food prices eased 0.1% (+4.3% 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 (%) Aug Jul Jun Aug Y/Y 2019 2018 2017
Personal Income -2.7 0.5 -1.2 4.7 3.9 5.3 4.9
  Wages & Salaries 1.3 1.3 2.1 -0.5 4.7 5.0 4.7
Disposable Personal Income -3.2 0.3 -1.5 5.4 3.7 5.8 4.9
Personal Consumption Expenditures  1.0 1.5 6.5 -1.9 3.9 4.9 4.5
Personal Saving Rate 14.1 17.7 18.7 7.3 (Aug '19) 7.5 7.8 7.2
PCE Chain Price Index 0.3 0.4 0.5 1.4 1.5 2.1 1.8
  Less Food & Energy 0.3 0.4 0.3 1.6 1.7 2.0 1.7
Real Disposable Income -3.5 -0.0 -2.0 4.0 2.2 3.6 3.1
Real Personal Consumption Expenditures 0.7 1.1 5.9 -3.2 2.4 2.7 2.6
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