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 5/1/08 For Mar 2008 | |||||||||||||||||||||||||
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Highlights
Personal income in March came in moderately healthy. Spending was up but largely due to higher costs. Inflation was up but more at the headline level than at the core, leaving the consumer sector softer than headline numbers suggest. Personal income in March advanced with a 0.3 percent increase, following a 0.5 percent gain in February. March's increase matched the consensus forecast for a 0.3 percent gain. Within personal income, the wages and salaries component posted a robust 0.5 percent gain, following a moderate 0.3 percent gain the month before.
On the spending side, personal consumption rose 0.4 in March after edging up 0.1 percent in February. The consensus projected an increase of 0.3 percent in personal spending. Spending was led by a jump in services with nondurables also boosted by higher gasoline prices. Durables fell in the latest month.
On the inflation front, the headline PCE price index firmed to a 0.3 percent increase, following a modest 0.1 percent uptick in February. The core PCE price index firmed but to a more moderate 0.2 percent from 0.1 percent in February and matched the consensus forecast.
Year-on-year, personal income growth slowed to 4.0 percent from 4.6 percent in February. Personal consumption growth firmed to 5.3 percent in March from 5.1 percent the prior month. Headline PCE inflation eased to 3.2 percent year-on-year from 3.4 percent in February. Meanwhile, core PCE inflation edged up to 2.1 percent from 2.0 percent on a year-ago basis in February.
Despite the first blush look of moderate health in this report, inflation detail suggests differently. Headline inflation is still on the warm side and real PCEs edged up only 0.1 percent in March after being flat the prior month. The consumer sector is a little on the shaky side. This was corroborated by a jump in initial unemployment claims this morning.
Personal income is still the key to keeping the consumer sector healthy and for maintaining growth in consumer spending. But despite a good income number for February, income growth is uncertain. Personal income in February jumped 0.5 percent but the reason for the jump is largely technical. There was a 2.2 percent jump in the personal current transfers component (various types of government and private sector assistance). The portion reflecting federal Medicare part D prescription drug payments returned to normal in February after being depressed for technical reasons - and this factor will not repeat in March. In February, the wages and salaries component advanced a more moderate 0.3 percent. But we could see improvement in this component based on the March employment report. Average weekly earnings jumped 0.6 percent, following a 0.3 percent gain in February. On the spending side, personal consumption rose a modest 0.1 percent in February and we may see an even weaker number for March as retail sales fell 0.6 percent in March. Retail sales provide source data for durables and nondurables PCEs. The overall PCE price index slowed to 0.1 percent in February as did the core PCE price index. But more recently the headline CPI jumped to 0.3 percent for March while the core CPI firmed to 0.2 percent. The average consumer is increasingly screaming that headline inflation is what is killing their budgets and the Fed may be listening and giving more attention to headline PCE inflation.
Personal income Consensus Forecast for March 08: +0.3 percent
Range: +0.2 to +0.4 percent
Personal consumption expenditures Consensus Forecast for March 08: +0.3 percent
Range: +0.1 to +0.5 percent
Core PCE price index Consensus Forecast for March 08: +0.2 percent
Range: +0.1 to +0.3 percent
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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. |
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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 | ||||||||||||||||||||||||||
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