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Personal Income Falls Slightly More Than Expected

August 4th, 2009 Michael McDonough

Personal Income fell 1.3% in June, compared to a revised increment of 1.3% in May.  This decline was likely due to continue weakness in the labor market coupled with a reduction in government transfers through stimulus payments.  May’s data included several one-time government payments to eligible individuals  that totaled US$157.6bn at an annual rate.  June’s decline could put some downward pressure on today’s trading, as markets continue trying to rationalize the strength of the recent rally.  This was the biggest decline in PI since January 2005.  Real disposable income fell 1.8% in the month.  All in all this is further evidence that US consumers remained mostly sidelined, and will likely remain so until we see some improvement in the jobs market.

Personal consumption expenditures rose 0.4% in June, versus a revised increase of 0.1% in May.  Non-durable goods purchases fell 0.4% in the month. The Core PCE rose 1.5%y/y compared to 1.6%y/y in May. This was the index’s smallest gain since 2003.

(Source: BEA)

Jun-09 May-09 Apr-09 Mar-09 Feb-09
Personal income, current dollars -1.3% 1.3% 0.2% -0.5% -0.8%
Disposable personal income:
Current dollars -1.3% 1.6% 0.9% -0.2% -0.7%
Chained (2005) dollars -1.8% 1.5% 0.8% -0.1% -1.0%
PCE:
Current dollars 0.4% 0.1% -0.1% -0.3% 0.4%
Chained (2005) dollars -0.1% 0.0% -0.2% -0.2% 0.1%
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