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Economy in Brief

U.S. Personal Spending Strengthens in August; Real Income Falls
by Tom Moeller  October 1, 2021

• Outside of autos, spending gains are broad-based.

• Increase in core prices steadies.

• Savings rate declines.

Personal consumption expenditures rose 0.8% (11.6% y/y) during August following a 0.1% July slip, revised from +0.3%. A 0.6% rise had been expected in the Action Economics Forecast Survey. Adjusted for price inflation, spending increased 0.4% (7.0% y/y) after falling 0.5% in July. The increase in real outlays reflected a 1.7% jump (8.8% y/y) in nondurables spending which made up a 1.5% July decline. Real food & beverage consumption surged 2.3% (5.6% y/y) after falling 1.7%. Clothing & footwear outlays recovered 1.8% in constant dollars (21.3% y/y) after a 2.9% decline. Real outlays on gasoline and other energy products fell 0.7% (+11.0% y/y) after a 1.2% increase. Real services outlays also were firm and posted a 0.3% August gain (6.9% y/y) after rising 0.7% in each of the prior three months. Constant dollar transportation service outlays strengthened 1.7% in August (23.9% y/y), the sixth straight month of notably strong increase. Housing & utilities spending gained 0.2% (0.9% y/y) after easing 0.3% in July. Recreation services outlays in constant dollars rose 0.1% (23.3% y/y), after five straight month of vigorous gains. Real health care outlays improved 0.5% (6.8% y/y) in August after rising 0.3% in July. Restaurant & hotel spending in August increased 0.2% (23.1% y/y) in real terms, also following five months of strong increase this year. Working 1.3% lower (+4.8% y/y) were real outlays on durable goods, the fifth consecutive monthly decline. Motor vehicle spending in August dropped 6.8% (-6.1% y/y) after declining in the prior three months. Elsewhere, spending improved. Real spending on home furnishings & appliances rose 2.1% (7.4% y/y) and made up July's decline. Real recreational goods & vehicles purchases increased 1.0% in August (9.7% y/y) after falling for four consecutive months.

The PCE chain price index in August rose 0.4% (4.3% y/y) for the second straight month. The price index excluding food and energy rose 0.3% in August (3.6% y/y), the same as in July. These gains were down from the 0.4% to 0.6% increases during the prior four months. Durable goods prices surged 0.9% (7.0% y/y) as prices for home furnishings & appliance prices jumped 1.3% (4.8% y/y). Recreational vehicle goods & vehicles prices strengthened 1.1% (2.4% y/y) while motor vehicle prices improved 0.5% (13.8% y/y). The services price index rose 0.3% (3.6% y/y) after four straight 0.4% gains. Energy prices jumped 1.9% (24.9% y/y), about the same as in June & July. Food & beverage prices rose 0.4% (2.8% y/y) after a 0.6% July gain.

Personal income improved an expected 0.2% in August (6.1% y/y) following an unrevised 1.1% July increase. Wages & salaries rose 0.5% (9.5% y/y), the smallest gain in six months. Rental income rose 0.5% (0.7% y/y) in August after a 0.4% rise. Transfer receipts rose 0.3% (2.9% y/y) after surging 3.0% in July. Earnings on assets were unchanged (3.6% y/y) as dividend income held steady (4.7% y/y) and interest income eased slightly (+2.7% y/y). Proprietors earnings declined 1.5% (3.7% y/y) after edging 0.3% lower in July. Disposable personal income improved 0.1% (4.5% y/y) in August after strengthening 1.1% in July. Adjusted for price inflation, disposable income declined 0.3% (+0.2% y/y) after rising 0.7% in July.

The personal savings rate fell to 9.4% in August from 10.1% in July. The rate reached a record high of 33.8% in April of last year. The level of personal savings fell 6.2% and has fallen by roughly one-third 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 2020 2019 2018
Personal Income 0.2 1.1 0.2 6.1 6.5 4.1 5.1
  Wages & Salaries 0.5 1.1 0.9 9.5 1.3 4.8 5.0
Disposable Personal Income 0.1 1.1 0.0 4.5 7.5 3.8 5.6
Personal Consumption Expenditures 0.8 -0.1 1.1 11.6 -2.6 3.7 5.1
Personal Saving Rate 9.4 10.1 9.0 15.0 (Aug '20) 16.6 7.6 7.6
PCE Chain Price Index 0.4 0.4 0.5 4.3 1.2 1.5 2.1
  Less Food & Energy 0.3 0.3 0.5 3.6 1.4 1.7 2.0
Real Disposable Income -0.3 0.7 -0.5 0.2 6.2 2.3 3.4
Real Personal Consumption Expenditures 0.4 -0.5 0.6 7.0 -3.8 2.2 2.9
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