Friday, May 28, 2010

Personal Income Up 0.4 Percent; Consumption Unchanged; PCE Deflator Unchanged

In April, personal income grew by 0.4%, the second fastest rate in a year. Most gains in income in recent months have been driven by increases in transfer payments. However, in April, solid wage growth was behind the increase. Wages and salaries grew by 0.4%. From a year-prior, personal income was up 2.5%. Wages were up only slightly from a year earlier; however, this was still an improvement from a negative year-over-year rate of change as recently as February.

Personal consumption growth came to a halt in April remaining unchanged over the month, after months of strong growth. April ended a period of seven consecutive monthly increase. From a year-prior, consumption was up 4.6%. This change reverses the trend of the past half year where consumers were increasing their spending at a rate faster than their income growth, therefore doing so at the expense of savings. The savings rate had been trending downward hitting a low of 3.1% in March. In April, it jumped back up to 3.6%, the highest it has been since January.

As measured by the PCE deflator, prices were unchanged over the month. Therefore, real incomes and real consumption rose at the same rate as the nominal numbers, 0.4% and 0.0%, respectively. From a year prior, the PCE deflator was 2.0% higher. Therefore, on a year-ago basis, real income was up 0.5% while real consumption was 2.6% higher. The core PCE deflator, which excludes energy and food prices, rose by 0.1% over the month and was 1.2% higher than a year prior.

10.05.28 (Source: Bureau of Economic Analysis)

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