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» VISIT US ONLINE @ DSNEWS.COM SPENDING GROWTH TOPS INCOME IN JULY By Mark Lieberman, Economist for the Five Star Institute Personal income rose $42.3 billion in July, but consumer spending increased $46.0 billion, the Bureau of Economic Analysis reports. The increase in in- come—0.3 percent— and the increase in spending—0.04 percent—both met analysts' expectations. Disposable from $173.0 billion in May. personal income—es- sentially after-tax income—rose $39.9 billion in July. Personal savings fell $9.9 billion. Personal savings as a percentage of dispos- able income fell to 4.2 percent in July from 4.3 percent in June. With continuing low interest rates, personal interest payments (non- mortgage interest) fell to $169.3 billion in June in July, down from the $29.2 billion increase in June. Transfer payments—predominantly unemployment insurance, Social Security, and Medicare—rose $10.3 billion in July after increasing $3.8 billion in June. Medicare pay- ments rose $6.9 billion while Social Security payments fell $2.5 billion and unemployment reported $61.8 billion increase in personal income for June was revised downward to $46.1 billion, and the originally reported $1.3 billion drop in spending was revised upward to show June spending flat to May. Wages and salaries grew just $16.3 billion The originally insurance benefits dropped $0.2 billion. The drop in Social Security payments resulted from the calendar: July 1 fell on a Sunday, ac- celerating July payments into June. The drop in unemployment insurance payments was the seventh consecutive monthly declinereflecting congressional mandated reductions. The increase in personal consumption was split between goods (up $26.0 billion) and services (up $20.1 billion). The increased spending on goods though was heavily weighted to non-durable goods suggesting consumers might be reluctant to spend on higher ticket items which are often financed through borrowing. Personal interest pay- ments—non-mortgage interest payments by households—rose $3.5 billion in July, the first month-month increase since March. The Personal Consumption Expenditure (PCE) Price Index—often considered the Federal Reserve's favored measure of infla- tion—was unchanged in July and dropped to 1.3 percent above its year-ago level. In June, the Index's year-year increase was 1.5 percent. The "core" PCE Index—excluding food and energy—was also unchanged in July and was up 1.6 percent in the last year, compared with a 1.8 percent year-year increase in June. 41

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