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Economy in Brief

U.S. Personal Income & Spending Growth Remains Moderate
by Tom Moeller   December 23, 2010

Personal income growth remains on a moderate growth track supported by improved jobs growth. Last month, income grew 0.3% following a revised 0.4% October rise, initially reported as 0.5%. A 0.2% increase has been the Consensus expectation. So far this year income has grown at a 3.6% annual rate after last year's 1.7% decline. Quicker growth is largely attributable to improvement in private sector wage income. Though it rose just 0.1% during November, that followed a 0.6% October jump. So far this year wages have grown at a 4.1% annual rate after last year's 5.8% decline. Still showing modest wage growth is the government sector where the 0.1% gain last month followed 0.3% in October. This year's 0.8% rise is down from 2.6% last year. Disposable personal income rose 0.3%, the same as during October. It's up at a 3.1% rate this year following last year's slim 0.7% increase which was boosted by the tax cut.

Proprietors' income reflected the improved economy with a 0.7% gain. It's up at a 6.1% rate this year after last year's 8.2% drop. Economic improvement also raised dividend income by 0.6% last month and at a 2.8% rate in 2010 following last year's 12.2% drop. Higher interest rates boosted interest income by 1.1% after a like gain in October. Nevertheless, interest income is off at a 2.9% rate so far this year.

Personal consumption expenditures rose 0.4% last month after a 0.7% October gain, initially reported as 0.4%. A 0.5% November increase had been expected. Spending on goods rose 0.5% (6.2% y/y) after a 1.7% October jump. Spending on apparel (6.7% y/y) and furniture (4.6% y/y) both improved but spending on motor vehicles and gasoline each fell during the month following strong gains earlier in the year. Spending on services rose a moderate 0.4% (2.7% y/y).

The personal savings rate slipped to 5.3% from a downwardly revised 5.3% in October. The savings rate remained down from the 5.9% level for all of last year though it remained up from the monthly low of 1.8% late in 2007.

Price inflation remained modest. The PCE chain price index rose 0.1% after October's 0.2% rise. The core PCE price deflator matched expectations and inched up 0.1% after four months of being unchanged. Motor vehicle prices slipped (1.9% y/y) while furniture prices (-4.6% y/y) fell. Twelve month growth of 1.3% in prices overall was the weakest since the early-1960s.

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

Personal Income & Outlays (%) Nov. Oct. Sept. Y/Y 2009 2008 2007
Personal Income 0.3 0.4 -0.0 3.8 -1.7 4.0 5.7
  Wages & Salaries 0.1 0.5 0.1 3.2 -4.3 2.1 5.8
Disposable Personal Income 0.3 0.3 -0.1 3.4 0.7 5.1 5.1
Personal Consumption Expenditures 0.4 0.7 0.3 3.8 -1.0 3.0 5.2
Saving Rate 5.3 5.4 5.7 5.6
5.9 4.1 2.1
PCE Chain Price Index 0.1 0.2 0.1 1.0 0.2 3.3 2.7
   Less Food & Energy 0.1 0.0 -0.0 0.8 1.5 2.3 2.4
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