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Economy in Brief

U.S. Personal Spending and Income Rise; Price Increase Strongest Y/Y Since 2012
by Tom Moeller  August 30, 2018

Personal consumption expenditures rose 0.4% (5.2% y/y) in July, the same as during June which was unrevised. A 0.3% increase had been expected in the Action Economics Forecast Survey. Personal income improved an expected 0.3% (4.7% y/y) following an unrevised 0.4% gain.

In constant dollars, personal spending increased 0.2% (2.8% y/y), the weakest increase in four months. Real durable goods spending fell 0.5% (+4.8% y/y), the first decline since February. A 1.3% shortfall (+0.1% y/y) in constant dollar purchases of motor vehicles & parts was the third consecutive decline. It added to a 0.3% fall (+6.1% y/y) in real spending on furniture & and appliances which came after two months of firm increase. Recreational goods & vehicles purchases rose 0.3% in real terms (8.9% y/y) following a 0.6% gain. Real outlays on nondurable goods strengthened 0.6% last month (3.2% y/y) after a 0.2% decline. Constant dollar clothing & footwear purchases jumped 1.5% (4.6% y/y) after a 0.5% decline, while the volume of gasoline & oil buying gained 0.4% (-0.1% y/y) following a 1.1% decline. Constant dollar spending on food & beverages rebounded 0.3% (3.8% y/y) following a 0.2% drop. Real services spending improved 0.2% (2.4% y/y) for the second month in the last three. Outlays at restaurants & hotels strengthened 0.9% in constant dollars (4.9% y/y), the third month of strong gain. Real health care outlays improved 0.3% (2.5% y/y) for the second straight month and constant dollar outlays on housing & utilities gained 0.2% (1.5% y/y) for the second straight month. Real financial services spending held steady (0.6% y/y) after three months of firm increase. Spending on recreation services was off 0.4% (+0.3% y/y) in real terms after a 0.6% rise.

The 0.3% increase in personal income reflected a 0.4% rise (4.7% y/y) in wages & salaries. It was the fourth such gain in the last five months. Rental income strengthened 0.7% (4.6% y/y), the strongest gain in four months. Proprietors income, however, eased slightly (+5.7% y/y) after a 0.6% rise. Dividend payments strengthened 0.6% (3.9% y/y) after a 0.5% rise. Interest income edged 0.1% higher (8.3% y/y) following three consecutive 0.3% gains. Transfer receipts increased 0.3% (4.1% y/y) after a 0.2% rise. Social security payments improved 0.3% (5.1% y/y) after rising 0.4%. Medicare payments rose 0.7% (5.3% y/y) following two 0.6% gains but Medicaid payments fell 0.4% (+3.2% y/y) following stability in July. Unemployment insurance payments gained 0.8% (-13.4% y/y) after no change while veterans benefits surged 3.8% (10.6% y/y) after two months of decline.

Disposable personal income increased 0.3% (5.3% y/y) after gaining 0.4% in three of the prior four months. Real disposable income improved 0.2% (2.9% y/y) after a 0.3% rise.

The personal savings rate was fairly stable at 6.7%, but that was down from 7.2% in March. Personal saving increased 5.5% y/y.

The chain type price index inched 0.1% higher for a second straight month. The 2.3% y/y increase was the strongest, however, since March 2012. The index excluding food & energy rose 0.2% (2.0% y/y) as it has for most of this year. Energy prices declined 0.5% (+13.4% y/y) following a 0.2% fall. Food prices inched 0.1% higher (0.5% y/y) after a 0.2% 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 (%) Jul Jun May Jul Y/Y 2017 2016 2015
Personal Income 0.3 0.4 0.3 4.7 4.4 2.6 4.9
  Wages & Salaries 0.4 0.4 0.3 4.7 4.6 2.9 5.1
Disposable Personal Income 0.3 0.4 0.4 5.3 4.4 2.8 4.4
Personal Consumption Expenditures 0.4 0.4 0.5 5.2 4.3 3.8 4.0
Personal Saving Rate 6.7 6.8 6.8 6.7
(Jul'17)
6.7 6.7 7.6
PCE Chain Price Index 0.1 0.1 0.2 2.3 1.8 1.1 0.3
  Less Food & Energy 0.2 0.1 0.2 2.0 1.6 1.7 1.3
Real Disposable Income 0.2 0.3 0.2 2.9 2.6 1.7 4.1
Real Personal Consumption Expenditures 0.2 0.3 0.3 2.8 2.5 2.7 3.7
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