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Economy in Brief

U.S. Personal Spending Increase Moderates; Income Growth Picks Up
by Tom Moeller  June 29, 2018

Personal consumption expenditures improved 0.2% (4.6% y/y) during May following a 0.5% April increase, revised from 0.6%. It was the weakest rise since a slight decline in February. A 0.4% gain had been expected in the Action Economics Forecast Survey.

Real personal spending eased slightly (+2.3% y/y) after a 0.3% gain. In constant dollars, durable goods spending improved 0.3% (6.1% y/y) after a 0.2% fall. A 0.5% decline in purchases of motor vehicles & parts was the second consecutive monthly shortfall. It was countered by a 1.0% rise (6.9% y/y) in spending on recreational goods & vehicles which followed a 0.3% increase. Outlays on home furnishings & appliances rose 0.2% (7.0% y/y) after easing 0.1%. Real outlays on nondurable goods rose 0.2% (2.7% y/y) after a 0.3% gain. Clothing & footwear purchases strengthened 0.8% (1.7% y/y) after a 0.3% rise while gasoline & oil buying eased 0.1% (-0.2% y/y) following a 0.8% rise. Spending on food & beverages improved 0.3% (3.4% y/y) following a 0.1% dip. Services spending declined 0.2% (+1.5% y/y) after a 0.3% rise. Spending on recreation services declined 1.0% (+0.5% y/y) after a 0.7% gain. Housing & utilities outlays backpedaled 0.8% (+0.8% y/y) and reversed the prior month's increase. Health care outlays improved 0.2% (2.1% y/y) following three straight months of no change or modest decline. Outlays at restaurants & hotels rose 0.2% (2.0% y/y).

Personal income rose an expected 0.4% in May (4.0% y/y) following a 0.2% gain, revised from 0.3%. Wages & salaries improved 0.3% (4.9% y/y) for the second straight month. Proprietors income increased 0.5% (3.8% y/y) after a 0.1% easing and rental incomes also improved 0.5% (4.4% y/y) following a 0.4% gain. Dividend payments surged 1.5% (0.9% y/y) after a 0.2% dip while interest income gained 0.1% (4.2% y/y) for a second straight month. Transfer receipts increased 0.2% (3.7% y/y) following two months of 0.5% increase. Social security payments improved 0.2% (5.1% y/y) after a 0.1% rise. Medicare payments rose 0.6% (3.5% y/y) following a 0.5% increase and Medicaid payments strengthened 0.8% (6.6% y/y) following a 1.2% rise. Unemployment insurance payments declined 4.2% (-11.3% y/y) while veterans benefits fell 3.1% (+6.0% y/y).

Disposable income increased 0.4% (4.0% y/y) following a 0.3% gain, revised from 0.4%. Real disposable income increased 0.2% (1.7% y/y) after a 0.1% rise.

The strength in income, accompanied by a lesser gain in spending, returned the personal savings rate to 3.2% after its April decline. The level of personal savings declined 10.9% y/y.

The chain type price index increased 0.2% (2.3% y/y) for a second straight month. The index excluding food & energy also rose 0.2% (2.0% y/y) for the sixth straight month. Energy prices strengthened 0.9% (12.8% y/y) after a 1.5% increase but food prices fell 0.2% (+0.3% y/y) following a 0.3% gain.

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.

Tracking and Stress-Testing U.S. Household Leverage from the Federal Reserve Bank of New York is available here.

Personal Income & Outlays (%) May Apr Mar May Y/Y 2017 2016 2015
Personal Income 0.4 0.2 0.3 4.0 3.1 2.4 5.0
  Wages & Salaries 0.3 0.3 0.2 4.9 3.3 2.9 5.1
Disposable Personal Income 0.4 0.3 0.3 4.0 2.9 2.6 4.5
Personal Consumption Expenditures 0.2 0.5 0.6 4.6 4.5 4.0 3.9
Personal Saving Rate 3.2 3.0 3.2 3.8
(May'17)
3.4 4.9 6.1
PCE Chain Price Index 0.2 0.2 0.0 2.3 1.7 1.2 0.3
  Less Food & Energy 0.2 0.2 0.2 2.0 1.5 1.8 1.3
Real Disposable Income 0.2 0.1 0.3 1.7 1.2 1.4 4.2
Real Personal Consumption Expenditures -0.0 0.3 0.6 2.3 2.8 2.7 3.6
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