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Economy in Brief


U.S. Personal Income & Spending Firm While Pricing Improves
by Tom Moeller June 28, 2010

Despite what was a disappointing May jobs number, personal income growth remained firm. May income rose 0.4% after an upwardly-revised 0.5% April gain. A 0.5% increase had been expected. Last month's increase reflected a stable 0.5% rise in wages & salaries which lifted the y/y increase to 0.7% after last year's 4.1% decline. Reflecting improved productivity, factory sector wages increased 1.8% y/y after the 11.1% decline during all of 2009. Service sector wages also rose 0.7%, improved from last year's 4.0% drop but government wage growth fell to 2.1% from 3.6%. Proprietors' income rose a greatly improved 5.9% after last year's 5.9% drop while the decline in interest income moderated to 0.4%. Improved corporate profits led to an improved 3.2% rise in dividends. 

Lower gasoline prices again held back the overall gain in spending. Nevertheless, personal consumption expenditures rose 0.2%. A 0.1% uptick had been expected. The 0.3% gain in real terms pulled the increase versus last year to 2.6%, its highest since before the recession began and up from moderate declines during the last two years. Spending on motor vehicles increased 2.2% (12.1% y/y). A 0.4% slip in furniture spending limited the 12-month increase here to 7.6% after sharp drops during the last two years. Apparel spending also fell during the last two months but the annual gain was a strong 4.6% after last year's 3.5% drop. Adjusted for lower prices the gain was 5.4% after declines during the last two years. Finally, spending on services grew 0.3% and the 1.3% y/y gain was up from last year's 0.1% uptick. Gains in food services and financial services accounts for the improvement.

The PCE chain price index slipped marginally both last month and during April with the drop in gasoline prices. The core PCE price deflator rose an improved 0.2%, the strongest gain since October. It owed to the first increase in apparel prices (-0.8% y/y) since January. Prices for furniture & appliance prices fell 4.4% y/y. Services prices also gained 0.2% (1.9% y/y) as health care prices rose 0.2% (2.5% y/y). Financial services prices also have strengthened by 3.9% y/y).

The personal savings rate inched up to 4.0%, its highest level since September.

The personal income & consumption figures are available in Haver's USECON and USNA databases.

Disposition of Personal Income (%)  May April March Y/Y 2009 2008 2007
Personal Income 0.4 0.5 0.4 1.6 -1.8 2.9 5.6
   Disposable Personal Income 0.4 0.6 0.5 2.7 1.0 3.9 4.9
Personal Consumption Expenditures 0.2 0.0 0.6 4.6 -0.4 3.1 5.4
Saving Rate 4.0 3.8 3.3 6.4
4.2 2.6 1.7
PCE Chain Price Index -0.0 0.0 0.1 1.9 0.2 3.3 2.7
   Less food & energy 0.2 0.1 0.1 1.3 1.5 2.4 2.4
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