The Bureau of Economic Analysis said that personal spending outstripped income growth in June, with both figures up modestly. Consumer purchases rose 0.5 percent in June, accelerating from the 0.2 percent pace seen in May. In the first six months of 2013, personal spending rose 1.5 percent, somewhat slower than the 2.4 percent and 2.0 percent paces experienced in the same time periods in 2011 and 2012. Both durable and nondurable goods spending in June was higher – a sign of progress from the declines in each in March and April – building on the gains seen in May.
Meanwhile, personal income increased 0.4 percent and 0.3 percent in May and June, respectively, after being flat in March. A comparison of year-to-date income growth is not helpful, with accelerated payouts before the fiscal cliff deal skewing the data. Instead, we will look at the year-over-year data, with personal income up 3.1 percent over the past 12 months. That suggests decent income growth; although, the annual pace has eased from what was observed in June 2011 and June 2012 (6.3 percent and 3.6 percent, respectively).
Wages and salaries in the manufacturing sector edged higher for the month, up from $750.2 billion to $754.4 billion. This reflects upward movement from the average of $707.1 billion and $735.4 billion in 2011 and 2012.
This data reflects recent changes in how the Bureau of Economic Analysis calculates gross domestic product, with new data going back to 1929. The new measures add intellectual property and research and development. This revision has impacted the personal income and spending data, as well, with new historical calculations stretching back decades. These revisions are most noticeable in the calculation of incomes and savings, raising both.
Using the newer data, the savings rate fell from 4.6 percent to 4.4 percent for the month. With personal spending growing at a faster pace than personal income, this should not be a surprise. The key takeaway from the savings rate is that Americans appear to be saving less this year than last. The average savings rate year-to-date in 2013 is 4.25 percent. This compares to 5.25 percent in the first 10 months of 2012. (I omitted November and December, which averaged 7.3 due to the before mentioned accelerated payouts at year’s end.)
Chad Moutray is the chief economist, National Association of Manufacturers.