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Economy in Brief

U.S. Personal Income Sluggish. Farmers' Income Fell, Wages OK
by Tom Moeller August 30, 2004

Personal income grew much less than expected last month. The 0.1% July gain was the weakest in nearly two years, followed a slim 0.2% rise in June and fell short of Consensus expectations for a 0.5% increase.

A 0.5% decline (+6.6% y/y) in proprietors' income was the source of much of last month's disappointment and that was driven by a 5.4% drop in farmers' income. Wages & salaries rebounded 0.4% (+4.4% y/y) from the slight decline in June. The rebound was paced by a 0.6% (2.7% y/y) increase in manufacturing wages.

Personal disposable income rose a slight 0.1% (4.3% y/y). After accounting for a 2.4% y/y rise in prices, real disposable income rose a much reduced 1.8% y/y.

Consumer spending jumped 0.8% following an upwardly revised 0.2% June decline. Higher light vehicle sales pulled durables up 4.1%. Non-durable goods sales rose a slight 0.2%, held back by lower gasoline prices, and services spending rose 0.4% (5.1% y/y).

The PCE chain price index fell slightly. Prices less food & energy also were weak, unchanged m/m (1.5% y/y) due to another decline in durables prices (-0.4% m/m, -1.9% y/y). Services prices rose a moderate 0.2% (2.5% y/y). "A Crude Crude Oil Calculation" from the Federal Reserve Bank of St. Louis is available here.

The savings rate fell to 0.6% and prior months' figures were revised down.

Disposition of Personal Income July June Y/Y 2003 2002 2001
Personal Income 0.1% 0.2% 4.9% 3.2% 1.8% 3.5%
Personal Consumption 0.8% -0.2% 5.9% 5.2% 4.6% 4.7%
Savings Rate 0.6% 1.3% 2.2% 1.4% 2.0% 1.8%
PCE Chain Price Index -0.0% 0.2% 2.4% 1.9% 1.4% 2.1%
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