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.