May Personal Income rose 1.4%, well above expectations of a .3% gain and April was revised up by .2% with the influence being “the increased government social benefit payments associated with the” stimulus plan. Disposable income as a result rose 1.6% BUT ex these special factors, disposable income rose just .2% as wages and salary’s fell by .1%. Due to the steroid shot into incomes, the savings rate rose to 6.9% after Personal Spending rose .3%, in line with forecasts. Because headline PCE rose .1%, REAL spending rose .2%, the first real gain since Jan. Bottom line, analyzing the savings rate has become more difficult in light of the one time special government transfer payments and with spending rising more than disposable income this month, the real savings rate likely would have fell a touch.

Category: MacroNotes

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One Response to “Income/Spending/Savings Rate”

  1. jc says:

    The paradox of savings!

    For decades home ownership was considered forced savings – what a difference a RE bubble makes!

    June 26 (Bloomberg) — Saks Fifth Avenue is cutting orders 20 percent after posting losses in the last four quarters. Kia Harris says some customers at the Washington shoe store where she works are buying one pair rather than three.

    In the recession following a borrowing binge that sent consumer debt to the highest level ever, Americans are shutting their wallets and building their nest eggs at the fastest pace in 14 years.

    While the trend will put the country’s finances in better balance and reduce its dependence on Chinese investment, it may also restrain economic growth in 2010 and beyond, said Lyle Gramley, a senior economic adviser with New York-based Soleil Securities Corp. and a former Federal Reserve governor.

    “There’s been a fundamental change in people’s behavior,” he said. “It will affect the economy for years.”

    Government data today showed that the household savings rate rose to 6.9 percent in May, a 15-year high, as personal spending increased less than incomes. The rate in April 2008 was zero.