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Economy in Brief

U.S. Personal Income Growth Outpaces Spending
by Tom Moeller  March 29, 2018

As income growth remains firm, individuals are using the money to rebuild savings.

Personal income rose 0.4% (3.7% y/y) during February for the third consecutive month. The gain matched expectations in the Action Economics Forecast Survey. Wages & salaries rose 0.5% (4.5% y/y) following a 0.6% increase. It was the third such rise in four months. Proprietors' income jumped 1.1% (3.5% y/y) following a 0.3% improvement. Rental income rose 0.6% (5.2% y/y) after a 0.5% gain. Dividend income rebounded 0.9% (3.7% y/y) following three consecutive months of decline. Interest income eased 0.1% (+3.2% y/y) for the second consecutive month. Personal transfer receipts held steady (2.7% y/y) following a 1.3% surge. Social Security payments eased 0.2% (+4.7% y/y) after a 2.5% jump. Medicare payments gained 0.2% (2.7% y/y) after a 0.1% uptick and Medicaid benefits rose 0.3% (2.8% y/) after a 0.5% rise. Unemployment insurance benefits dropped 2.5% (-8.9% y/y) after increasing 1.4%.

Disposable income increased 0.4% (3.9% y/y) following a 1.0% surge. Adjusted for price changes, take-home pay improved 0.2% (2.1% y/y) after a 0.6% gain.

Personal consumption expenditures gained an expected 0.2% (4.6% y/y) during February following an unrevised 0.2% January rise. These were the smallest monthly increases since August. Adjusted for price inflation, personal spending remained unchanged (2.8% y/y) after a 0.2% decline. Real durable goods purchases rose 0.6% (7.1% y/y) after a 1.6% decline. Motor vehicle buying eased 0.2% (5.4% y/y) after a 3.5% decline. Real spending on home furnishings & appliances fell 0.4% (+7.5% y/y), down for the third straight month. Real spending on recreational goods & vehicles recovered 1.9% (7.4% y/y) following a 1.4% decline. Constant dollar spending on nondurable items fell 0.3% (+2.8% y/y), down for the third straight month. Real purchases of clothing & footwear retreated 1.2% (+3.8% y/y), off for the third straight month. Real spending on food & beverages eased 0.1% (+2.5% y/y), also down for the third consecutive month. Real spending on gasoline & oil dropped 1.1% (+0.4% y/y) after a 0.8% fall. Real spending on services held steady (2.1% y/y) after ticking 0.1% higher. Real recreation spending recovered 0.7% (0.9% y/y) after a 1.0% decline while housing & utilities expenditures dropped 0.7% (+1.3% y/y) after a 0.1% slip. Real outlays on health care improved 0.1% (2.5% y/y) for the second straight month while transportation services outlays declined 0.5% (+2.1% y/y) after a 0.4% gain.

The personal savings rate increased to 3.4%, the highest level in six months. That was up from December's roughly twelve-year low of 2.4%.

The PCE chain-type price index rose 0.2% (1.8% y/y) after a 0.4% increase. Excluding food & energy, prices improved 0.2% (1.6% y/y) following a 0.3% gain. Nondurable goods prices held steady (1.6% y/y) following a 1.0% rise fueled by strength in gasoline & energy prices. Durable goods prices declined 0.3% (-2.6% y/y) following a 0.1% increase. Services prices improved 0.3% (2.5% y/y) after three straight months of 0.2% increase.

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 (%) Feb Jan Dec Feb Y/Y 2017 2016 2015
Personal Income 0.4 0.4 0.4 3.7 3.1 2.4 5.0
  Wages & Salaries 0.5 0.6 0.5 4.5 3.3 2.9 5.1
Disposable Personal Income 0.4 1.0 0.4 3.9 2.9 2.6 4.5
Personal Consumption Expenditures 0.2 0.2 0.5 4.6 4.5 4.0 3.9
Personal Saving Rate 3.4 3.2 2.4 4.1
(Feb.'17)
3.4 4.9 6.1
PCE Chain Price Index 0.2 0.4 0.1 1.8 1.7 1.2 0.3
  Less Food & Energy 0.2 0.3 0.2 1.6 1.5 1.8 1.3
Real Disposable Income 0.2 0.6 0.2 2.1 1.2 1.4 4.2
Real Personal Consumption Expenditures 0.0 -0.2 0.3 2.8 2.8 2.7 3.6
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