Tag: savings rate

Personal Income and Spending Both Rose Modestly in February

The Bureau of Economic Analysis said that personal income and spending both increased by 0.3 percent in February, extending the modest gains of January. After weather-related softness in December, the data have been more favorable in the first two months of 2014. On a year-over-year basis, each of these measures has risen 3.0 percent. This compares to personal income growth of 2.9 percent in 2013, with a 3.2 percent pace for personal spending last year. (If you were to omit December, which was an outlier month due to the fiscal cliff the year before, personal income growth would have also been 3.2 percent.)

The increase in spending in February stemmed from both nondurable goods and services, both of which increased 0.3 percent for the month. Durable goods purchases fell for the third straight month, down 0.2 percent in February. It is likely that poor weather conditions negatively impacted these figures, with other releases showing weak spending for automobiles and other items from December to February.

Meanwhile, wages and salaries were up 0.2 percent in February, rising 3.1 percent over the past 12 months. For manufacturers, there was some softness on the wage front, likely due to weather-related slowdowns. Indeed, manufacturing wages and salaries have fallen from $758.0 billion in November to $754.2 billion in February. Prior to that, compensation had been rising, particularly as activity had picked up. For instance, wages in the sector averaged $707.1 billion, $735.4 billion, and $747.8 billion in 2011, 2012, and 2013, respectively.

The savings rate edged slightly higher, up from 4.2 percent in January to 4.3 percent in February. Still, we have generally seen this rate decelerate over the past year. The savings rate dropped from an average of 5.3 percent through the first 11 months of 2012 to 4.5 percent in 2013.

Overall inflationary pressures remain minimal, with prices for core personal consumption expenditures (PCE) up just 0.9 percent year-over-year, down from 1.2 percent last month. Energy prices had risen in December and January on increased home-heating costs, but these eased a bit in February, down 0.4 percent.  Inflation remains below the Federal Reserve’s 2 percent target rate, which frees the Fed up to pursue its highly accommodative policies. If anything, there are some who argue that disinflationary pressures might be a concern, but that is less true in the U.S. than it is in Europe.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Personal Income and Spending Bounced Back in January, but Goods Purchases Were Lower

The Bureau of Economic Analysis said that personal income and spending bounced back in January after weaknesses seen in December. Consumer spending rose 0.4 percent in January after increasing just 0.1 percent the month before. Year-over-year growth in personal spending also edged higher, up from 3.2 percent to 3.45 percent, its fastest pace since December 2012. Nonetheless, the news was not as good for manufacturers as the headline figure might suggest.

The increase in spending in January stemmed entirely from services, up 0.9 percent for the month. In contrast, durable and nondurable goods spending were both lower, down 0.3 percent and 0.7 percent, respectively. It was the second consecutive monthly decline for durable goods spending, which declined 2.6 percent in December. It is likely that poor weather conditions negatively impacted these figures, with other releases showing weak spending for automobiles and other items over these two months.

Meanwhile, personal income increased 0.3 percent in January, an improvement from being unchanged in December. Total wage and salary disbursements were up 0.2 percent for the month, or 3.6 percent over the past 12 months. For manufacturers, wages and salaries have been essentially flat over the past three months, hovering around $758 billion. The figure has gradually moved higher over the longer-term, however. Six months ago, wages and salaries in the sector were $742.5 billion, and they have moved up from averages of $707.1 billion and $735.4 billion in 2011 and 2012, respectively.

The savings rate remained at 4.3 percent in January for the second straight month, and we have generally seen this rate decelerate over much of the past year. For instance, the savings rate dropped from an average of 5.3 percent through the first 11 months of 2012 (omitting December because of accelerated payouts due the fiscal cliff) to 4.5 percent in 2013.

Overall inflationary pressures remain minimal, with prices for core personal consumption expenditures (PCE) up just 1.1 percent year-over-year. Energy prices were up 0.4 percent in January, or 3.5 percent over the past 12 months, as more Americans needed to heat their homes due to cold weather conditions. Nonetheless, inflation remains below the Federal Reserve’s 2 percent target rate, which frees the Fed up to pursue its highly accommodative policies.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Personal Spending Rose Modestly in December, But Incomes Were Flat

Personal incomes were unchanged in December, according to the latest data from the Bureau of Economic Analysis. For the fourth quarter, incomes were up just marginally, increasing a very modest 0.1 percent. For the year of 2013 as a whole, personal incomes rose 2.8 percent, below the 4.2 percent gain observed in 2012.

For manufacturers, total wages and salaries increased from $760.9 billion in November to $763.6 billion in December. Average manufacturing wages and salaries for 2013 were $749.3 billion, up 1.9 percent from $735.4 billion in 2012.

Meanwhile, personal spending rose 0.4 percent in December, extending the 0.6 percent increase seen in November. Overall, consumers spent 1.1 percent more in the fourth quarter, with a gain of 2.0 percent for all of 2013. This was slightly below the 2.2 percent increase observed in 2012.

December’s higher personal spending figure stemmed largely from a significant jump in nondurable goods activity, up 1.5 percent for the month. In contrast, personal durable goods spending declined 1.8 percent, offsetting the 1.8 percent jump in November. Looking at the entire year, however, durable goods spending growth outpaced that for nondurable goods, 7.1 percent to 2.1 percent.

With personal incomes flat for the month, the savings rate fell from 4.3 percent in November to 3.9 percent in December. This was the lowest rate in 11 months, and it was the third consecutive monthly decrease, down from 5.1 percent in September.

The other notable item to report from this release was the personal consumption expenditure (PCE) data, which looks at consumer inflation. The Federal Reserve prefers this measure when looking at pricing pressures. Year-over-year growth in the PCE has edged somewhat higher over the past couple months, up from 0.7 percent in October to 0.9 percent in November to 1.1 percent in December. Yet, this still suggests that inflation remains largely in-check, at least for now. Core inflation — which excludes food and energy — has risen just 1.2 percent over the past year, which remains well below the Fed’s stated target of 2 percent.

Chad Moutray is the chief economist, National Association of Manufacturers.

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November Personal Spending Increased Modestly Led by Strong Growth in Durable Goods

The Bureau of Economic Analysis said that personal spending growth grew 0.5 percent in November, extending the 0.4 percent gain seen in October. Consumer spending has increased 3.5 percent over the past 12 months, its fastest pace so far in 2013 and an improvement from the 2.9 percent year-over-year rate in September. Nonetheless, it is clear that personal spending growth has decelerated from the 4.1 percent pace average of 2012 to the 3.1 percent average year-to-date in 2013.

Looking specifically at the November data, the growth in personal goods spending stemmed from an increase in durable goods expenditures. Spending on durable goods increased from an annualized $1.282 trillion in October to $1.307 trillion in November. Meanwhile, purchases of nondurable goods declined in the month from $2.667 trillion to $2.657 trillion.

Both durable and nondurable goods spending continue to increase over a longer term. Six months ago (May), for instance, durable and nondurable goods purchases were $1.255 trillion and $2.585 trillion, respectively.

Meanwhile, personal income rebounded in November, rising by 0.2 percent after falling 0.1 percent in November. Much of October’s decrease had been attributable to a sharp falloff in farm proprietors’ income, which was still down in November. But, it was offset by stronger growth in wages and salaries, which increased 0.4 percent for the month. For manufacturers, total wages and salaries rose from $754.3 billion to $759.1 billion. This figure has gradually moved higher. Six months ago, wages and salaries in the sector were $744.8 billion, and they moved steadily higher from the averages of $707.1 billion and $735.4 billion in 2011 and 2012, respectively.

Perhaps disappointingly, the year-over-year pace of personal income continues to decelerate, down from 3.4 percent in October to 2.3 percent in November. In contrast to personal spending, this was the lowest annual pace of the year. Through the first 11 months of 2013, the annual pace has averaged 3.2 percent, down from the 4.2 percent rate experienced in all of 2012.

With personal spending outstripping personal income, the savings rate has fallen in each of the past two months, down from 5.1 percent in September to 4.5 percent in October to 4.2 percent in November.

Overall inflationary pressures remain minimal, with prices for personal consumption expenditures (PCE) unchanged for the second month in a row. The year-over-year rate of PCE growth was just 0.9 percent, and when you exclude food and energy, the annual rate of core PCE growth was 1.1 percent. Much as we have seen in recent consumer and producer price data, inflation remains below the Federal Reserve’s 2 percent target rate, which frees the Fed up to pursue its highly accommodative policies.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Modest Growth in Personal Spending on Goods in October

The Bureau of Economic Analysis said that personal spending growth rose modestly in October. Consumer spending increased 0.3 percent in October, the sixth straight month of gains in purchasing. The year-over-year pace strengthened from 2.6 percent in September to 2.8 percent in October. Still, it is clear that personal spending growth has decelerated from the 4.1 percent pace average of 2012 to the 3.0 percent average year-to-date in 2013.

Looking specifically at the October data, spending was higher for both durable and nondurable goods, up 0.6 percent and 0.3 percent, respectively.

Meanwhile, personal income fell 0.1 percent in October, the first decline since January. To be fair, however, much of that decrease was attributable to a sharp falloff in farm proprietors’ income. Wages and salaries rose 0.1 percent, and for manufacturers, total wages and salaries totaled $749.2 billion in October, up from $745.9 billion in September.  This figure has gradually moved higher, up from averages of $707.1 billion and $735.4 billion in 2011 and 2012, respectively.

The year-over-year pace of personal income has also eased, down from 3.9 percent in September to 3.4 percent in October. Through the first 10 months of the year, the annual pace has averaged 3.3 percent, down from the 4.2 percent rate experienced in all of 2012.

With personal spending outstripping personal income, the savings rate fell from 5.2 percent in September to 4.8 percent in October. Even with the slight decrease, the savings rate has edged higher in general as the year has progressed, with the year-to-date average being 4.6 percent. Nonetheless, the savings rate has generally been lower this year than last, when the saving rate averaged 5.3 percent from January to November 2012. (I omitted December due to accelerated payouts skewing the data in the lead-up to the fiscal cliff deal.)

Chad Moutray is the chief economist, National Association of Manufacturers.

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Personal Spending Slowed in September even as Income Growth was Strong

The Bureau of Economic Analysis said that personal spending growth weakened somewhat in September, even as personal incomes grew. Consumers purchased 0.2 percent more in September, down from the 0.3 percent rate of August. On a year-over-year basis, the pace of personal spending growth has decelerated from 3.3 percent in June to 2.7 percent in September, suggesting some degree of hesitance on the part of Americans to increase their overall spending.

This was particularly true for durable goods products, which spending in this category essentially flat in the third quarter, according to this data. For the month, spending on durable goods was down 1.3 percent in September, rebounding from a 1.4 percent increase in August. In contrast, nondurable goods spending in the third quarter was up 1.3 percent, with a 0.6 percent gain in September.

Meanwhile, personal income growth remained strong, up 0.5 percent in both August and September. Over the course of the past 12 months, incomes have risen 3.7 percent, but in the third quarter, the annual pace accelerated to 4.45 percent, a sign of renewed strength.

Manufacturing sector wages and salaries edged higher for the month, up from $754.3 billion to $754.6 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 were up 0.5 percent and 0.4 percent over the past two months.

With growth in personal income outstripping personal spending in each of the past three months, the savings rate has moved higher. It has grown from 4.4 percent in June to 4.9 percent in September. This was the highest savings rate of 2013 so far, approaching the average of 5.3 percent for January to November of 2012. (I omitted December due to accelerated payouts skewing the data in the lead-up to the fiscal cliff deal.)

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 core personal consumption expenditures was 1.2 percent in September, the same as in August and roughly unchanged for the past six months. This keeps prices below the 2 percent growth threshold established by the Federal Reserve Board, with minimal inflationary pressures for now.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Personal Income and Spending Grew Modestly in August

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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Manufacturing Wages and Salaries Slightly Lower in July, But Up Year-to-Date

The Bureau of Economic Analysis said that personal income and personal spending both rose by 0.1 percent in July. In each case, that was the slowest pace since April, and both were below consensus expectations. In terms of a longer trend, personal income has grown 3.3 percent over the past 12 months, with personal spending up 3.1 percent year-over-year.

Overall wages and salaries were off 0.3 percent for the month, with manufacturing compensation also lower. Wages and salaries in the manufacturing sector were down from $752.7 billion in June to $749.0 billion in July. Still, year-to-date growth has been positive, with wages and salaries up from $736.1 billion in January.

Meanwhile, goods consumption increased from $3.883 trillion to $3.903 trillion at the annual rate. With that said, the data were mixed, with durable goods spending lower (down 0.2 percent) and nondurable goods purchases higher (up 0.9 percent). Service sector spending was unchanged.

The savings rate did not change between June and July, staying at 4.4 percent. While this is below the pace of one year ago (5.1 percent), it was consistent with the 4.2 to 4.6 percent range experienced over the past six months.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Personal Spending Outstripped Income Growth in June

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.

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Accelerated Payouts Boost Personal Income in December

With the threat of the fiscal cliff looming, many businesses began thinking about the tax implications of going off of the cliff, and they adjusted their payouts accordingly. As proof of this, the Bureau of Economic Analysis (BEA) said that personal income soared 2.6 percent in December, building on the 1.0 percent gain in November.

Digging deeper into the data, it is clear that many companies pushed up their dividend payouts to avoid possible higher taxes in 2013. (As part of the fiscal cliff deal enacted on January 2, 2013, dividend taxes went from 15 percent to 20 percent for those individuals earning more than $400,000, but it could have gone up to 39.6 percent had we gone over the fiscal cliff.) Personal dividend income increased 4.5 percent in November and a whopping 34.3 percent in December. There has also been evidence of bonuses being pushed into December, as well, even though BEA does not keep track of that.

Manufacturing wages and salaries rose from $751.4 billion in November to $756.2 billion in December. On average, manufacturing wages and salaries have continued to rise, up 7.2 percent over the past year. This is a reflection of the increased production in the sector overall. In contrast, wage and salary disbursements in all private sectors rose 4.4 percent over the past year.

While income was increasing significantly in December on end-of-year moves, personal consumption was growing more slowly, up 0.2 percent. The largest spending gains were in durable goods, up 1.0 percent (and extending the 2.7 percent increase of November). Based on the GDP data released yesterday, we know that much of this increase was in the motor vehicle sector. Nondurable spending declined 0.2 percent. For the year, though, personal spending numbers have been decent, up 3.6 percent, helping to boost demand for manufactured goods.

With income increasing substantially outstripping spending growth, the savings rate jumped from 4.1 percent in November to 6.5 percent in December. It had been as low as 3.3 percent in September. The savings rate is now at its highest point since May 2009; although, I would expect for it to settle back to reality in January once these one-time-only wage increases are no longer part of the picture.

Chad Moutray is the chief economist, National Association of Manufacturers.

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