The April report on personal income and outlays from the Department of Commerce is out today. According to the Bureau of Economic Analysis, personal income rose 0.2% month-over-month in April in both current and chained (2005) dollars. Disposable personal income also rose 0.2% and personal consumption expenditures (PCE) rose 0.3%.
Personal savings fell by $8.3 billion in April to 3.4% from 3.5% in March. The best news is that the PCE price index excluding food and energy costs rose less than 0.1% in April. The PCE price index is a key inflation measure and is up just 1.8% in the past year, below the Fed’s target number of 2%.
With both income and spending rising while inflation falls, the rise in US unemployment to 8.2% and the low gain in non-farm payrolls makes a bit more sense. One might conclude that the people who are working are getting paid more and they are not saving the increase but spending it, either to make an often-postponed purchase or as a modest splurge.
February’s PCE growth was 0.6%, then spending went flat in March before rising again in April. More spending should lead to more jobs, but that’s not happening. If ‘Plan A’ was quantitative easing, what’s ‘Plan B’?
The BEA’s report is available here.
Paul Ausick
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