Global| Sep 29 2003U.S. After Tax Income Surged Again
by:Tom Moeller
|in:Economy in Brief
Summary
Personal disposable income surged for a second month in August. The 0.9% (5.7% y/y) jump followed a 1.5% gain in July, both spurred by lower personal tax payments. Wages and salaries rose just 0.1% following no change in July. That [...]
Personal disposable income surged for a second month in August. The 0.9% (5.7% y/y) jump followed a 1.5% gain in July, both spurred by lower personal tax payments.
Wages and salaries rose just 0.1% following no change in July. That continued to reflect the recent weakness in job growth. During the last ten years there has been a 78% correlation between y/y wage growth and growth in nonfarm payrolls. However, the strength of a 1.8% y/y gain in wages relative to a 0.4% y/y decline in payrolls reflects the payoff for higher worker productivity.
Higher disposable income again fueled consumer spending which rose an expected 0.8% (5.4% y/y), the fifth firm gain in the last six months. Personal spending on durable goods jumped 2.8% (4.9% y/y) led by a 9.6% m/m gain in sales of light vehicles to 19.00M units, the highest selling rate since October 2001.
In addition, weak pricing power drove the incentive to buy. Though the PCE price deflator was lifted 0.3% in August by higher fuel prices, the deflator less food and energy rose just 0.1% (1.3% y/y). The durables' price deflator continued a slide that began in early 1995, falling 0.2% (-3.2% y/y). Constant dollar durables spending rose 3.0% in August (8.3% y/y).
Personal consumption of services rose 0.3% (4.9% y/y) while services prices were tame, up just 0.2% (3.0 y/y).
The saving rate rose to 3.8% from a downwardly revised July level. It was the highest savings rate since February.
| Disposition of Personal Income | Aug | July | Y/Y | 2002 | 2001 | 2000 |
|---|---|---|---|---|---|---|
| Personal Income | 0.2% | 0.3% | 3.1% | 2.7% | 3.3% | 8.0% |
| Personal Consumption | 0.8% | 0.9% | 5.4% | 4.5% | 4.5% | 7.0% |
| Savings Rate | 3.8% | 3.6% | 3.3% | 3.7% | 2.3% | 2.8% |
| PCE Price Deflator | 0.3% | 0.2% | 1.9% | 1.4% | 2.0% | 2.5% |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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