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Economy in Brief

U.S. Real Personal Spending Eases as Prices Strengthen in April
by Tom Moeller  May 28, 2021

• Spending on goods weakens broadly; services purchases rise.

• Increase in core prices hits twenty-year high.

• Total take-home earnings decline but wages surge.

Personal consumption expenditures increased 0.5% during April (28.5% y/y) following a 4.7% March increase, revised from 4.2%. A 0.5% rise had been expected in the Action Economics Forecast Survey. Adjusted for price inflation spending eased 0.1% (26.0% y/y) after rising 4.1%. The weak gain in outlays reflected a 0.9% decline (+66.2% y/y) in outlays on durable goods. The decline was paced by a 1.7% weakening (+50.6%) in spending on home furniture & appliances after rising 9.0% in March. Spending on recreational goods & vehicles also fell 1.7% (+43.6% y/y) after a 12.2% March gain. To the upside, motor vehicles & parts purchases rose 1.6% (88.9% y/y) after gaining 19.8%. Nondurable goods spending fell 1.6% (+19.5% y/y) after surging 6.1% in March. Clothing spending weakened 3.6% last month, but roughly doubled y/y, after a 16.3% rise. Food & beverage sales fell 2.0% (+5.0% y/y) after rising 3.4% while spending on gasoline edged 0.3% higher (41.8% y/y). Working 0.6% higher (19.3% y/y) were real outlays on services after a 1.6% March surge. Restaurant & hotel spending strengthened 2.2% (93.3% y/y) after jumping 11.8% in the previous month.. Recreation services outlays rose 6.2% (102.3% y/y) as they did the month before. Transportation service outlays eased 0.7% (+62.5% y/y) after rising as 8.3% when travel restrictions were eased. Health care outlays improved 0.5% (46.5% y/y) and housing & utilities spending improved 0.3% (0.9 % y/y).

The PCE chain price index increased 0.6% (3.6% y/y) last month, the same as in March. The price index excluding food and energy surged 0.7% (3.1% y/y) after rising 0.4%. It was the strongest monthly increase since October 2001. Durable goods prices rose 1.4% (5.2% y/y) while nondurable costs improved 0.3% (4.1% y/y). Services prices rose an elevated 0.5% (3.1% y/y) for the second straight month. Energy prices eased 0.2% (+24.8% y/y) after four strong monthly gains. Food & beverage prices rose 0.3% (0.9% y/y) after two 0.2% gains.

Personal income weakened 13.1% (+0.5% y/y) after a record 20.9% March surge, revised from 21.1%. A 15.0% decline had been expected. Transfer payments fell 41.4% following March's $1,400 federal government stimulus payments to most individuals. Wages & salaries strengthened 1.0% (16.4% y/y) for a second straight month with gains in payroll employment. Proprietors' income surged 3.2% (30.5% y/y) after strengthening 6.5% in March. Rental income rose 0.5% (2.7% y/y) following a 0.8% gain. Earnings on assets rose 0.5% (-0.7% y/y) as dividend income rose 1.0% (-2.1% y/y) and interest income improved 0.2% (0.3% y/y). Disposable personal income fell 14.6% (-1.0% y/y) last month after rising 23.4% in March. Adjusted for price inflation, disposable income fell 15.1% (-4.4% y/y) after a 22.7% March strengthening.

The personal savings rate declined to 14.9% in April from 27.7% in March. The rate reached a record high 33.7% in April of last year. The level of personal saving fell by roughly one-half in April both m/m and 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 2020 2019 2018
Personal Income -13.1 20.9 -6.9 0.5 6.3 3.9 5.3
  Wages & Salaries 1.0 1.0 0.1 16.4 0.7 4.7 5.0
Disposable Personal Income -14.6 23.4 -7.8 -1.0 7.2 3.7 5.8
Personal Consumption Expenditures 0.5 4.7 -1.0 28.5 -2.7 3.9 4.9
Personal Saving Rate 14.9 27.7 14.7 33.7 (Apr '20) 16.4 7.5 7.8
PCE Chain Price Index 0.6 0.6 0.3 3.6 1.2 1.5 2.1
  Less Food & Energy 0.7 0.4 0.1 3.1 1.4 1.7 2.0
Real Disposable Income -15.1 22.7 -8.1 -4.4 6.0 2.2 3.6
Real Personal Consumption Expenditures -0.1 4.1 -1.3 24.0 -3.9 2.4 2.7
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