Personal income is the dollar value of income received from all sources by individuals. Personal outlays include consumer purchases of durable and nondurable goods, and services. Why Investors Care
| Released on 6/27/08 For May 2008 | |||||||||||||||||||||||||
| |||||||||||||||||||||||||
Highlights
Personal income got another huge spike from income tax rebate checks and a sizeable portion of those checks appears to be going into spending - even if for higher priced gasoline. Headline inflation has heated up more but core inflation is staying cool. Personal income in May jumped 1.9 percent, following a 0.3 percent rise in April. The boost in May topped the consensus forecast for a 0.4 percent gain. While the huge gain from income tax checks is important, a rebound in wages and salaries actually should be more comforting. The wages and salaries component rebounded 0.3 percent, following a 0.1 percent dip the month before.
On the spending side, personal consumption soared 0.8 percent in May after rising 0.4 percent in April. The market had forecast an increase of 0.7 percent for personal spending. But spending was led by a 1.2 percent boost in nondurables which includes gasoline. Durables slipped 0.2 percent while services posted a 0.7 percent gain.
Higher gasoline prices are having a very negative impact on headline inflation as the headline PCE price index worsened to 0.4 percent in May from 0.2 percent the month before. However, the core PCE price index was unchanged at 0.1 percent in May and came in better than the consensus expectation for a 0.2 percent rise. Year on year, headline PCE inflation came in at 3.1 percent while that for the core was 2.1 percent.
Putting today's numbers into the big picture for the economy, real personal consumption posted a healthy 0.4 percent gain, following a 0.2 percent increase the month before. The spending in May was quite good in real terms despite higher gasoline prices. This gives second quarter GDP a good foundation for modest growth, providing good evidence that we will avoid recession throughout the first half of the year.
Today's report shows the income tax rebate checks working to boost the consumer sector although higher gasoline prices are offsetting somewhat. Inflation is still a problem but on a two-track path with headline inflation getting hotter while core inflation is modest.
Personal income growth appears to be softening as April's increase eased to 0.2 percent, following a 0.4 percent advance in March. April's true weakness was masked by income tax rebate checks as the wages and salaries component actually fell 0.2 percent, following a 0.5 percent boost the month before. A surge in government benefits reflected the start of the income tax rebates intended to boost the economy. On the spending side, personal consumption rose 0.2 in April after jumping 0.4 percent in March. On the inflation front, the headline PCE price index came in with a 0.2 percent increase, following a 0.3 percent gain in March. Meanwhile, the core PCE price index slowed to 0.1 percent in April, following a 0.2 percent increase the prior month. With the latest jump in the overall CPI to 0.6 percent for May, we are likely to see a similar increase in the headline PCE price index.
Personal income Consensus Forecast for May 08: +0.4 percent
Range: +0.2 to +1.9 percent
Personal consumption expenditures Consensus Forecast for May 08: +0.7 percent
Range: +0.3 to +0.9 percent
Core PCE price index Consensus Forecast for May 08: +0.2 percent
Range: +0.2 to +0.2 percent
![[Chart]](chart.gif)
|
Changes in taxes or social security cost of living adjustments can cause some sharp variations in monthly disposable income growth. However, on the whole, monthly changes in disposable income fluctuate less than monthly changes in personal consumption expenditures. |
![[Chart]](chart_1.gif)
|
Monthly changes in personal consumption expenditures are usually skewed by large changes in spending on durable goods. Spending on nondurable goods and services tend to be less volatile from one month to the next. |
| Personal Income and Outlays: 2008 Release Schedule | ||||||||||||||||||||||||||
|
powered by
![[Econoday]](../../../../../../../../../images/logo.gif){kind=logo}