Global| Jun 27 2008U.S. Income Surged Due to Stimulus Payment
by:Tom Moeller
|in:Economy in Brief
Summary
Nominal personal income surged 1.9% during May as the government's tax rebate checks began to be mailed out. The gain by far exceeded Consensus expectations for a 0.4% increase, although excluding rebates income rose just 0.4%. [...]
Nominal personal income surged 1.9% during May as the government's tax rebate checks began to be mailed out. The gain by far exceeded Consensus expectations for a 0.4% increase, although excluding rebates income rose just 0.4%.
Disposable personal income also surged. The 5.7% month-to-month jump lifted the three-month growth rate to 28.2% (AR), the fastest since early-1975.
Wage & salary income rose a lesser 0.3% (4.6% y/y) after a 0.1% decline during April. As a result of weakness in the monthly gains, the annualized three-month growth in wages amounted to just 2.7% versus a 5.8% rise during all of last year. Factory sector wages rose 0.1% (1.8% y/y) after a downwardly revised 0.4% April decline. Wages & salaries in the private service-providing industries rose 0.3% (+5.2% y/y) after a slight 0.1% dip in April. Wages in the government sector rose 0.3% (5.1% y/y) but three-month growth fell to 4.1%.
Interest income fell 0.3% (+0.1% y/y) for the eighth straight month of decline. The flat reading for y/y growth follows 5% to 14% growth during each of the prior three years. Dividend income rose a firm 0.6% (9.7% y/y) but here too growth is well below that of the prior four years.
The PCE chain price index doubled expectations with a 0.4% increase, driven by a 0.8% rise in nondurables (energy) prices. The core PCE price index, however, fell short of Consensus forecasts and rose just 0.1%. That continued weakness left the three-month growth in core prices at 1.8%, its weakest since the middle of last year. Easier or stable gains have been registered for goods prices, however, services prices grew at a firmer 4.0% annual rate during the last three months, nearly double the growth at the middle of last year.
Personal consumption expenditures surged 0.8% last month, driven higher by the rise in gasoline prices. Adjusted for price inflation, real spending still was firm and rose 0.4%, the strongest increase since August of last year. The gain lifted the three-month rate of increase to 3.1% (AR).
Though annualized growth in spending on motor vehicles was negative over the last three months, spending elsewhere strengthened. Real spending on furniture soared at a 15.4% rate, apparel spending jumped at a 10.5% rate and real growth in spending on gasoline & oil (if you can believe it) jumped at a 14.5% rate. Recreation spending also grew at an accelerated 4.4% during the last three months. These and other detailed spending figures are available in Haver's USNA database.
The personal savings rate surged to 5.0% as a result of the rebate checks not having all been spent.
| Disposition of Personal Income (%) | May | April | Y/Y | 2007 | 2006 | 2005 |
|---|---|---|---|---|---|---|
| Personal Income | 1.9 | 0.3 | 6.4 | 6.2 | 6.6 | 5.9 |
| Disposable Personal Income | 5.7 | 0.4 | 10.7 | 5.7 | 5.9 | 4.7 |
| Personal Consumption | 0.8 | 0.4 | 5.4% | 5.5 | 5.9 | 6.2 |
| Saving Rate | 5.0 | 0.4 | 0.2 (May '07) | 0.5 | 0.4 | 0.5 |
| PCE Chain Price Index | 0.4 | 0.2 | 3.1 | 2.5 | 2.8 | 2.9 |
| Less food & energy | 0.1 | 0.1 | 2.1 | 2.1 | 2.2 | 2.2 |
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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