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Economy in Brief

U.S. Personal Spending Holds Steady Despite Income Increase
by Tom Moeller  February 1, 2016

Personal consumption expenditures were little changed during December (3.2% y/y) following a revised 0.5% November increase, initially reported as 0.3%. A 0.1% rise had been expected in the Action Economics Forecast Survey. When adjusted for a slight dip in prices, spending rose 0.1% (2.6% y/y after a 0.4% increase. Notable caution was exhibited when it came to product spending. Durable goods purchases fell 0.9% (+3.5% y/y) following a 1.5% jump. Motor vehicle purchases were reduced 3.2% (+0.2% y/y), reversing all of the November surge. Home furnishing & appliance buying remained unchanged (3.6% y/y) after two months of 0.2% increase. Spending on recreational goods & vehicles edged up 0.1% (6.4% y/y) following six months of strong increase. In the nondurable goods sector, clothing purchases declined 0.7% (+0.8% y/y), off for the third month in the last four. Services spending picked up some of the slack with a second straight 0.4% rise (4.1% y/y). A 1.9% jump (4.7% y/y) in recreation services spending paced the increase. That was followed by a 1.0% gain (6.2% y/y) in hotels & restaurants. Lower energy prices afforded this strength as housing & utilities spending fell 0.2% (+2.9% y/y).

Cautious spending accompanied a moderate 0.3% rise (4.2% y/y) in personal income which followed an unrevised 0.3% gain. A 0.2% rise had been expected. Wage & salary earnings rose 0.2% (4.5% y/y) following a 0.5% rise. Rental income improved 0.5% (6.7% y/y), the strongest gain in six months. Transfer receipts jumped 0.7% (5.4% y/y), driven by a 1.4% rise (4.7% y/y) in social security payments. Medicare receipts improved 0.5% (4.6% y/y) for a third straight month. Jobless insurance benefits advanced 0.9% but they were off 8.5% y/y with the firmer job market. Proprietors earnings surged 1.0% (2.7% y/y) following a 0.1% dip. Dividend earnings fell minimally (+3.8% y/y) while interest earnings fell 0.7% (+1.5% y/y) for the third straight month.

Disposable personal income increased 0.3% (3.7% y/y) after a 0.2% gain. Adjusted for price inflation, take-home pay rose 0.4% (3.1% y/y) following three months of lesser increase.

The personal savings rate improved to 5.5% from 5.3%, earlier reported as 5.5%. The rate remained nearly the highest since 2012. Personal saving increased 15.3% during the last twelve months. During all of 2015, the personal savings rate averaged 5.2%, the highest level in three years.

The chain price index eased 0.1% (+0.6% y/y) after five months of little change. The index change was held back by a 0.7% fall (-2.5% y/y) in nondurable goods prices as energy costs declined 2.6% (-13.6% y/y), the fourth sharp decline in five months. Prices have fallen 24.8% since June 2004. Food prices fell 0.4% (-0.3% y/y) after a 0.2% decline. Excluding food & energy, prices remained unchanged (+1.4% y/y). Durable goods prices eased 0.1% (-1.4% y/y) while services prices improved 0.1% (1.9% y/y) after a 0.3% rise.

The personal income & consumption figures are available in Haver's USECON database with detail in the USNA database. The Action Economics figure is in the AS1REPNA database.

Personal Income & Outlays (%) Dec Nov Oct Dec Y/Y 2015 2014 2013
Personal Income 0.3 0.3 0.4 4.2 4.5 4.4 1.1
  Wages & Salaries 0.2 0.5 0.6 4.5 4.8 5.1 2.7
Disposable Personal Income 0.3 0.2 0.3 3.7 3.8 4.2 -0.1
Personal Consumption Expenditures -0.0 0.5 0.0 3.2 3.4 4.2 3.1
Personal Saving Rate 5.5 5.3 5.5 5.0
(Dec. '14)
5.2 4.8 4.8
PCE Chain Price Index -0.1 0.1 0.1 0.6 0.3 1.4 1.4
  Less Food & Energy 0.0 0.2 0.0 1.4 1.3 1.5 1.5
Disposable Income 0.4 0.2 0.2 3.1 3.5 2.7 -1.4
Real Personal Consumption Expenditures 0.1 0.4 -0.0 2.6 3.1 2.7 1.7
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