Global| Oct 01 2020U.S. Personal Income Falls Sharply While Spending Increases in August
by:Tom Moeller
|in:Economy in Brief
Summary
• Income decline due to lower unemployment insurance payments. • Spending continues to strengthen. • Price inflation eases. Personal income declined 2.7% during August (+4.7% y/y) following a 0.5% July rise, revised from 0.4%. A 2.1% [...]
• Income decline due to lower unemployment insurance payments.
• Spending continues to strengthen.
• Price inflation eases.
Personal income declined 2.7% during August (+4.7% y/y) following a 0.5% July rise, revised from 0.4%. A 2.1% drop had been expected in the Action Economics Forecast Survey. A 52.0% decline in unemployment insurance benefits accounted for the outsized decline as it followed a 6.0% July shortfall. Wages & salaries rose 1.3% (-0.5% y/y), strong for the for the fourth consecutive month but they eased 0.5% y/y. Proprietors jumped 2.7% (-1.4% y/y) and rental income strengthened 1.2% (2.7% y/y). Disposable personal income declined 3.2% (+5.4% y/y) in August. Adjusted for price inflation, take-home pay decreased 3.5% (+4.0% y/y) following a 0.3% rise.
Personal consumption expenditures increased 1.0% last month (-1.9% y/y) after rising 1.5% in July, revised from 1.9%. A 0.8% increase had been expected. Adjusted for price inflation, spending improved 0.7% but remained down 3.2% y/y. Real spending on durable goods held steady (11.2% y/y) following three consecutive months of strong increase. Spending on motor vehicles increased 0.8% (7.0% y/y) while home furnishings purchases fell 1.5% (+8.0% y/y). Purchases of recreational goods eased 0.5% (+21.3% y/y), about the same as in July. Real spending on nondurable goods slipped 0.3% (+3.0% y/y) last month as clothing purchases dropped 0.6% (-3.7% y/y) after falling 1.6% in July. Spending on services rose 1.1% (-7.2% y/y) last month after rising 1.3%. Spending at hotels and restaurants rose 6.7% (-17.9% y/y), strong for the fourth straight month. Spending on recreation rose 3.6% but was off roughly one-third y/y. Transportation services outlays rose 2.4% (-22.6% y/y).
Last month's rise in spending relative to income lowered the personal saving rate to 14.1% from 17.7% in July. The rate reached a record high 33.6% in April. The level of personal saving increased 103.8% y/y.
The PCE chain price index increased 0.3% (1.4% y/y) in August following an upwardly revised 0.4% July rise. The price index excluding food and energy also rose 0.3% (1.6% y/y) after an upwardly revised 0.4% increase in July. Energy prices increased 0.8% (-9.4% y/y), strong for the third straight month. Food prices eased 0.1% (+4.3% 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.
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.
More Economy in Brief
