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Economy in Brief

U.S. Real DPI Up 0.3%, Real PCE Flat, Prices Easy
by Tom Moeller March 28, 2008

Nominal personal income grew 0.5% last month and beat Consensus expectations for a 0.3% gain. The rise lifted the three-month growth in income to 4.8%, its best since September.

Wage & salary income moderated a bit and rose 0.3% after January's 0.5% increase. Factory sector wages rose 0.3% (+0.4% y/y) and wages & salaries in the private service-providing industries rose 0.3% (3.9% y/y). That y/y increase is much reduced from the 6.4% gain last year as well as from the 6.8% 2006 rise. Wages in the government sector rose a strong 0.5% (5.1% y/y) but here the story is one of acceleration after a 4.6% rise last year and a 4.1% 2006 increase.

Lower interest rates caused the fifth straight monthly decline in interest income (+3.6% y/y). That y/y increase was less than one third the rate of gain at the end of 2005. Dividend income rose another firm 0.6% (11.5% y/y), a double digit rate of gain that is down somewhat from its peak 16.3% in 2006.

Disposable personal income growth improved last month to 0.5% which was its best increase since last August. The rise followed 0.4% gains during the prior two months. It raised the thee month growth rate to 5.5% (AR). Adjusted for prices, which moderated, real disposable income rose 0.3% and the three month growth rate picked up to 2.6%.

Personal consumption expenditures rose just the expected 0.1%. Real personal consumption expenditures were flat. That lowered the three-month growth rate to 0.3%, its worst since October 2005.

Real spending on discretionary items continued weak. Motor vehicle & parts purchases did rise 0.3% but three month growth fell to -7.4%. Real spending on household furniture & appliances also rose 0.3%, as it did in January, but three month growth fell to -2.1%. Real spending on apparel rose 1.4% however because of a sharp decline in December, three month growth improved only to -1.5%. These and other detailed spending figures are available in Haver's USNA database.

The PCE chain price index rose just 0.1% as energy prices fell 1.9%. The core PCE price index matched expectations and rose just 0.1%. The three month growth in prices fell to 2.1%, down from the three month gains of 2.7% registered last year.

The personal savings rate improved somewhat to all of 0.3% from the negative 0.1% during January.

Yesterday's speech by Fed GovernorFrederic S. Mishkin on inflation titled Comfort Zones, Shmumfort Zones can be found here.

Disposition of Personal Income (%) February January Y/Y 2007 2006 2005
Personal Income 0.5 0.3 4.6 6.2 6.6 5.9
  Disposable Personal Income 0.5 0.4 4.7 5.7 5.9 4.7
Personal Consumption 0.1 0.4 5.1% 5.5 5.9 6.2
Saving Rate 0.3 -0.1 0.9 (Feb. 07) 0.4 0.4 0.5
PCE Chain Price Index 0.1 0.3 3.4 2.5 2.8 2.9
  Less food & energy 0.1 0.2 2.0 2.1 2.2 2.2
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