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Economy in Brief

U.S. Personal Spending and Income Increase Moderately in August
by Tom Moeller  September 30, 2022

•Spending gain mostly reflects higher prices.

•Income increases, but wage growth slows.

•Prices rise moderately as core inflation surges.

The consumer exhibited caution with spending last month. The August increase in personal consumption expenditures of 0.4% (8.2% y/y) followed a 0.2% July dip and a 1.2% June surge. A 0.2% increase had been expected in the Action Economics Forecast Survey.

The nominal gain was inflated by prices, which rose 0.3% as measured by the PCE price index. The 0.1% rise (1.8% y/y) in real sending followed a 0.1% July decline. Real spending on durable goods declined 0.4% last month (+2.9% y/y) due to a 0.9% decrease (-2.6% y/y) in furniture & appliance purchases. Real spending on recreational goods & vehicles fell 0.6% (+8.8% y/y) but motor vehicle buying rose 0.5% (1.5% y/y). Real spending on nondurable goods eased 0.1% (-2.2% y/y) as apparel spending was little-changed (-0.3% y/y). Real outlays on gasoline and other energy goods rose 2.1% (-2.0% y/y) but real outlays on "other" goods fell 0.8% (+0.2% y/y). Food & beverage buying eased 0.1% (-5.5% y/y). Spending on consumer services also was subdued last month, posting a 0.2% rise (3.0% y/y) when adjusted for inflation. Real housing & utilities expenditures rose 0.1% (0.8% y/y) while healthcare spending gained 0.4% (1.9% y/y). Recreation services buying edged 0.1% higher (7.2% y/y) when adjusted for higher prices but real expenditures at restaurants & hotels held steady (4.9% y/y).

Inflation generally intensified last month. The PCE chain price index rose 0.3% after easing 0.1% in July. The 6.2% y/y rise was below the 7.0% peak this past June. However, it remained close to the highest rate of price inflation in over 40 years. Last month's increase was held back by a 10.0% decline (+27.7% y/y) in energy prices. Food & beverage prices remained strong and rose 0.8% (12.4% y/y). It was a 0.6% rise (4.9% y/y) in core prices that was the real eye-catcher in the report, matching the 0.6% rise (6.3% y/y) in the core CPI for August. A 0.6% rise (5.0% y/y) in the services price index powered the overall gain, driven by a 1.9% jump (12.1% y/y) in transportation prices. The gain in the durable goods price index wasn't far behind, rising 0.5% (5.3% y/y). These gains were accompanied by a 0.8% decline (+10.6% y/y) in nondurables prices as energy prices moved lower. The overall decline masked a 0.3% rise (5.4% y/y) in apparel prices.

Personal income rose an expected 0.3% (3.9% y/y) during August, the same as in July. The gain reflected a 0.3% rise (8.6% y/y) in wages & salaries, up with continued gains in employment. A 1.2% rise (3.7% y/y) in proprietors' income was offset by a 0.1% slip (+3.9% y/y) in receipts on assets. This reflected no change (3.9% y/y) in dividend income that was accompanied by a 0.2% slip (+3.9% y/y) in interest earnings. Rental income rose 0.4% (10.4% y/y) and personal transfer receipts increased 0.2% (-8.1% y/y). Disposable income rose 0.4% last month (1.5% y/y) while real disposable earnings improved 0.1% (-4.5% y/y).

Similar gains in income and outlays left the personal saving rate unchanged at 3.5% in August. The rate stood at 9.5% last August. The level of personal savings eased slightly m/m but was 62.8% lower y/y.

These figures were revised back through 2017. 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.

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