U.S. Personal Income Growth Outpaces Spending

A firmer job market is lending strength to earnings power. Personal income increased 0.4% during March (4.2% y/y) following a 0.1% uptick in February, revised from 0.2%. A 0.3% increase had been expected in the Action Economics Forecast Survey. Wages & salaries increased 0.4% (4.7% y/y) following a 0.1% slip. In other income categories, rental income strengthened 0.8% (7.7% y/y), but proprietors income remained unchanged (3.5% y/y). Transfer payments increased 0.3% (3.7% y/y) as Medicare receipts rose 0.5% (5.3% y/y). Social security payments eased slightly (+2.5% y/y). Unemployment insurance payments declined 1.5% (-7.2% y/y).

Disposable personal income increased 0.4% (4.0% y/y) following February's 0.1% rise. Adjusted for price increases, take-home pay rose 0.3% (3.1% y/y) following 0.2% increases in the prior two months.

Personal consumption expenditures during March increased a minimal 0.1% (3.5% y/y) following two months of 0.2% gain. February's rise was revised from 0.1%. The latest increase fell short of expectations for a 0.2% rise. Spending on durable goods declined 0.6% (+1.3% y/y), leaving Q1 growth at -2.7% (AR). Motor vehicle & parts purchases fell 2.0% (-4.8% y/y), down for the fourth consecutive month. Spending on furniture & appliances offset this decline with a 0.4% rise (3.1% y/y), while recreational goods & vehicles purchases rose 0.2% (6.1% y/y). Nondurable goods spending advanced 0.6% (0.4% y/y), but quarterly purchases declined 4.7% (AR). Clothing & footwear buying declined 0.5% (+0.3% y/y), but gasoline purchases increased 4.5% with higher prices (-17.6% y/y). Food & beverage purchases rose 0.4% (1.0% y/y). In the services area, outlays rose 0.1% (4.8% y/y), the gain held back by a 0.4% decline (+2.8% y/y) in spending on housing & utilities. Health care outlays rose 0.4% (4.5% y/y) while recreation buying gained 0.3% (8.8% y/y). Spending at restaurants & hotels fell 0.6% (+5.5% y/y).

Adjusted for price inflation, personal consumption expenditures remained constant m/m (2.6% y/y) after a 0.3% increase. During Q1, spending rose at a 1.9% annual rate, the weakest rise in a year.

The personal savings rate held steady at 5.4%, but February's rate was lessened to 5.1%. January's rate also was revised down to 5.2%. The Q1 savings rate of 5.2% equaled the level in Q1'15. The level of personal savings rose 12.7% y/y in March.

The chain-type price index rose 0.1%, and the y/y increase of 0.8% compared to a 0.3% rise during all of last year. The price index excluding food & energy also nudged 0.1% higher (1.6% y/y). The service price index gained 0.2% (2.1% y/y). The durable goods index declined 0.3% (-1.6%) while the nondurables price index eased 0.1% (-1.9% y/y).

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.

A Discussion of Key Secular Trends, Economic Conditions and Monetary Policy by Robert S. Kaplan, President & CEO, Federal Reserve Bank of Dallas is available here.