U.S. Real DPI Flat in March, Trend Growth Reduced

Disposable personal income grew 0.3% in March, but adjusted for a 0.3% increase in prices, income was flat. During February, however, real income rose 0.3%. As a result, the 1.9% three month growth rate in real DPI was up slightly from the negative growth during the end of last year, but still that was down from the 3.1% rise during all of 2006 and 2007.

Nominal personal income grew 0.3% during March which was slightly lower than the 0.4% Consensus expectation. The gain left the three-month growth in income at 4.4% which was down from the 6.2% rise during all of last year.

Wage & salary income rose 0.5% (3.3% y/y) after a 0.3% February increase. Three month growth in wages amounted to 5.5% which has been stable of late but well reduced from the 10% rates of growth early in 2007 and late in 2006. Factory sector wages rose 0.3% (-0.2% y/y), the same as in February, and wages & salaries in the private service-providing industries rose 0.5% (3.6% y/y). These two annual rates of growth are well off the growth rates posted during the middle of 2007. Wages in the government sector rose 0.3% (5.0% y/y) and three month growth rose to 7.4%. That was up from the 4.6% rise during 2007.

Lower interest rates caused the sixth straight monthly decline in interest income (+2.4% y/y) after a 5.0% gain last year and 8.0% growth during 2006. Dividend income rose another firm 0.6% (10.9% y/y), though that annual rate of growth is down from 13.8% last year and from 16.3% in 2006.

Personal consumption expenditures grew 0.4% during March though, when adjusted for price inflation, real spending rose just 0.1% and it grew at a 1.0% annual rate over the last three months. That's after 2.9% growth in 2007 and less than the 3.0% growth in each of the prior two years.

Real spending on discretionary items continued weak. Motor vehicle & parts purchases fell 0.5% last month and three month growth cratered to -10.3%. Real spending on household furniture & appliances fell 0.4% in March and three month growth was 0.2% after a 7.8% rise last year. Real spending on apparel increased 0.8% and three month growth actually picked up to 10.3% after an abysmal December last year. These and other detailed spending figures are available in Haver's USNA database.

The PCE chain price index rose 0.3% after the 0.1% uptick in February. The 0.2% rise in the core PCE price index beat expectations for a 0.1%. The three month growth in prices rose to 2.9% but that was up slightly from 2.5% in 2007 and 2.8% in 2006. The core price index rose 0.2% but the three month rate of growth fell slightly to 2.0% from 2.1% last year and 2.2% in 2006.

The personal savings rate remained barely positive at 0.2%, down just a bit from prior years.

The value of construction put in place in March fell a more-than-expected 1.1% but February's level was revised up. The latest decline was the fifth in the last six months and the March level was 8.4% below the peak two years ago.

The value of residential building activity cratered 4.6% in March led by a 5.3% (-36.1% y/y) decline in building of single family units. That was similar to the decline in the prior several months. Building activity on multi-family units also slipped 0.5% (-17.0% y/y) and spending on improvements reversed nearly all of the prior month's jump and fell 4.8% (+10.4% y/y).

During the last twenty years there has been an 84% correlation between the q/q change in the value of residential building and its contribution to growth in real GDP.

The value of nonresidential building activity jumped 1.9% but three month growth of 9.5% is down from an 18.0% rise last year. A decline in multi-retail building of 2.7% (AR) during the last three months compared with a 14.5% rise last year. A 1.6% 3-month gain in commercial building was down from 13.4% growth last year. Growth in office building remained firm at 13.3% versus 19.6% growth last year.

Growth in public construction over the last three months of 5.0% compared to a 12.2% rise last year. Construction on highways & streets rose at a 10.1% rate during the last three months after last year's rise of 7.4%. (The value of construction on highways & streets is nearly one third of the value of total public construction spending.) Building activity of educational facilities fell at a 3.8% rate after last year's 12.6% rise.

The more detailed categories of construction represent the Census Bureau’s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

Maps and data that illustrate subprime and alt-A mortgage loan conditions across the United States, from the Federal Reserve, can be found here.

The NTC and CBI indices show that the UK MFG sector is on the decline. The CBI industrial total orders reading is placed in its range percentile at 55 the fifty-fifth percentile, nearly the same relative position as for the overall NTC MFG index at 51 the fifty-first percentile. Both indices have fallen sharply ‘recently although for the NTC PMI index the drop came several months ago, while the CBI orders series took its sharp drop just this month. There is some evidence that suggests the NTC index has moved in advance of the CBI orders index in the past. Note that while the two indices seem to track each other fairly well, their respective ‘zero’ or neutral points do not match up on this two scale chart. For the CBI neutral is at zero, for the NTC report neutral is at 50. Looking at our ‘percentile of range statistics’ gets us away from this sort of dilemma. We can se that the CBI points to surging inflation on top of weakening growth.