The Bureau of Economic Analysis said that personal income rose 0.4 percent in August, its fastest pace since February. This was in-line with consensus expectations, and it represented a small pickup from the 0.2 percent gain seen in July. The year-over-year pace of personal income growth has crept higher over the course of this year, up from 2.4 percent in January to 3.4 percent in July to 3.7 percent in August. The largest increases in August stemmed from jumps in both rental and proprietors’ income.
Wages and salaries in the manufacturing sector edged higher for the month, up from $747.3 billion to $753.7 billion. This figure has grown slow-but-steady, reflecting upward movement from averages of $707.1 billion and $735.4 billion in 2011 and 2012, respectively. Total wages and salaries increased 0.4 percent for the month, matching the personal income growth rate.
Meanwhile, personal spending grew by 0.3 percent, a slight acceleration from the 0.2 percent pace of July. The year-over-year pace suggests modest growth in consumer purchases, with spending up 3.2 percent from 12 months ago. This represents a bit of a rebound from the slower pace of the spring; for instance, the year-over-year paces were 2.6 percent and 2.9 percent in April and May, respectively. In August, higher goods spending was driven mainly by a marginal increase in durable goods purchases, with a slight decline in nondurable goods activity.
With growth in personal income outstripping personal spending, the savings rate rose from 4.5 percent in July to 4.6 percent in August. Nonetheless, Americans have had to dip into their savings more this year than last. Omitting December 2012 and January 2013 data because of skewing from the fiscal cliff, the average savings rate in the past seven months (February to August) was 4.5 percent, lower than the 5.3 percent average for the first 11 months of 2012 (January to November).
These data also show that inflationary pressures remain modest. Similar to the recent consumer price index report, price gains for consumer items have risen in an acceptable range. Year-over-year growth in prices for personal consumption expenditures was 1.2 percent in August, down from 1.3 percent in July. This keeps pricing pressures below the 2 percent threshold established by the Federal Reserve. With that said, durable goods prices continue to move lower, down 1.9 percent over the past 12 months; whereas, nondurable goods firms have been able to rise prices 0.4 percent in the past year.
Chad Moutray is the chief economist, National Association of Manufacturers.
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