Personal Income and Consumer Spending Down in July

August 29, 2008

This article is included in these additional categories:

Retail & E-Commerce

Personal income decreased 0.7% in July, after increasing 0.1% in June, according to the “preliminary” estimates released by the Bureau of Economic Analysis (BEA) of the US Department of Commerce, writes Retailer Daily.

The difference reflects rebates provided by the Economic Stimulus Act of 2008.* Excluding the rebates, personal income grew 0.5% in July, after increasing 0.3% in June.

Real disposable personal income (DPI), income-adjusted for inflation and taxes, fell 1.7% in July after falling 2.6% in June. Excluding rebates, real DPI decreased 0.1% in July after decreasing 0.4% in June.*

bea-real-dpi-consumer-spending-april-july-2008.jpg

Real consumer spending (personal consumption expenditures – PCE) decreased 0.4% in July after decreasing 0.1% in June.

PCE prices rose 0.6% in July after rising 0.7% in June. Excluding food and energy, prices rose 0.3%, the same as in June.

(* Only some rebates – those reported as transfer payments – are included in personal income. All rebates are included in real DPI.)

More detailed data released by the BEA, below.

Personal Income and Outlays: July 2008

Personal income decreased $89.9 billion, or 0.7%, in July, in contrast to an increase of $7.4 billion, or 0.1%, in June and an increase of $218.0 billion, or 1.8%, in May.

Disposable personal income (DPI) decreased $114.7 billion, or 1.1%, in July, compared with a decrease of $208.0 billion, or 1.9%, in June and an increase of $595.9 billion, or 5.7% in May.

Personal consumption expenditures (PCE) increased $24.1 billion, or 0.2%, in July, compared with an increase of $65.5 billion, or 0.6%, in June.

Real DPI decreased 1.7% in July, compared with a decrease of 2.6% in June. Real PCE decreased 0.4%, compared with a decrease of 0.1%.

bea-personal-income-dpi-pce-april-july-2008.jpg

In April, May, June, and July, changes in disposable personal income (DPI) – personal income less personal current taxes – were affected by the Economic Stimulus Act of 2008.

The federal government issued rebate payments of $1.9 billion in April ($23.3 billion at an annual rate), of $48.1 billion in May ($577.1 billion at an annual rate), of $27.9 billion in June ($334.4 billion at an annual rate), and of $13.7 billion in July ($164.1 billion at an annual rate). These rebates increased government social benefit payments and reduced personal current taxes.

The rebates boosted the change in DPI $23.3 billion in April and $553.8 billion in May, and reduced the change in DPI by $242.7 billion in June and by $170.3 billion in July.

Excluding these rebate payments, which are discussed more fully below, DPI increased $55.6 billion, or 0.5%, in July, increased $34.7 billion, or 0.3%, in June, and increased $42.1 billion, or 0.4%, in May.

Wages and salaries

Private wage and salary disbursements increased $13.2 billion in July, compared with an increase of $7.9 billion in June.

Goods-producing industries’ payrolls increased $4.6 billion, compared with an increase of $1.8 billion; manufacturing payrolls increased $0.7 billion, compared with an increase of $1.7 billion.

Services-producing industries’ payrolls increased $8.6 billion, compared with an increase of $6.0 billion.

Government wage and salary disbursements increased $4.3 billion, compared with an increase of $6.1 billion.

Other personal income

Supplements to wages and salaries increased $3.8 billion in July, compared with an increase of $3.3 billion in June.

Proprietors’ income increased $4.4 billion in July, compared with an increase of $7.6 billion in June. Farm proprietors’ income decreased $2.3 billion, compared with a decrease of $2.0 billion. Nonfarm proprietors’ income increased $6.8 billion, compared with an increase of $9.6 billion.

Rental income of persons increased $4.4 billion in July, compared with an increase of $7.4 billion in June. Personal income receipts on assets (personal interest income plus personal dividend income) increased $18.4 billion, in contrast to a decrease of $4.2 billion.

Personal current transfer receipts decreased $136.6 billion in July, compared with a decrease of $19.6 billion in June. The July and June changes reflected provisions of the Economic Stimulus Act of 2008, which boosted the level of personal current transfer receipts by $4.2 billion (at an annual rate) in July, by $149.4 billion in June, and by $179.6 billion in May. These personal current transfer receipts reflected payments to individuals who either paid no income tax or whose payment exceeded the amount of income tax paid.

Contributions for government social insurance – a subtraction in calculating personal income – increased $1.7 billion in July, compared with an increase of $1.1 billion in June.

Personal current taxes and disposable personal income

Personal current taxes increased $24.7 billion in July, compared with an increase of $215.5 billion in June.

Provisions of the Economic Stimulus Act of 2008 reduced the level of personal current taxes by $159.9 billion (at an annual rate) in July, by $185.0 billion in June, and by $397.5 billion in May. The reductions in current personal taxes reflected rebate payments to eligible individual taxpayers.

Disposable personal income (DPI) – personal income less personal current taxes – decreased 114.7 billion, or 1.1%, in July, compared with a decrease of $208.0 billion, or 1.9%, in June.

Personal outlays and personal saving

Personal outlays – PCE, personal interest payments, and personal current transfer payments – increased $24.4 billion in July, compared with an increase of $63.2 billion in June. PCE increased $24.1 billion, compared with an increase of $65.5 billion.

Personal saving – DPI less personal outlays – was $133.8 billion in July, compared with $272.9 billion in June. Personal saving as a percentage of disposable personal income was 1.2% in July, compared with 2.5% in June.

Saving from current income may be near zero or negative when outlays are financed by borrowing (including borrowing financed through credit cards or home equity loans), by selling investments or other assets, or by using savings from previous periods.

Real DPI and real PCE

Real DPI – DPI adjusted to remove price changes – decreased 1.7% in July, compared with a decrease of 2.6% in June.

Real PCE – PCE adjusted to remove price changes – decreased 0.4% in July, compared with a decrease of 0.1% in June. Purchases of durable goods decreased 1.6%, compared with a decrease of 1.4%. Purchases of motor vehicles and parts accounted for most of the decrease in July and about one-half the decrease in June. Purchases of nondurable goods decreased 0.9% in July, compared with a decrease of 0.3% in June. Purchases of services increased less than 0.1%, compared with an increase of 0.2%.

PCE price index – The price index for PCE increased 0.6% in July, compared with an increase of 0.7% in June. The PCE price index, excluding food and energy, increased 0.3% in July, the same increase as in June.

Revisions

Estimates for personal income and DPI have been revised for January through June; estimates for PCE have been revised for April through June.

Economic Stimulus Act of 2008

The Economic Stimulus Act of 2008 provides rebate payments to eligible individual taxpayers as well as tax reductions for businesses. For individuals, the amount of the rebate is determined by information reported on tax filings for 2007 and is based on filing status, level of adjusted gross income, and the number of qualifying children. According to the Joint Committee on Taxation and the Congressional Budget Office, rebates to individuals are expected to total $106.7 billion for fiscal year 2008. The majority of rebates were sent during the initial round of payments, which began April 28, 2008, and continued on a weekly basis through mid-July 2008.

In the national income and product accounts (NIPAs), rebates for residents of the 50 states and the District of Columbia are recorded as either an offset to personal current taxes or as a social benefit payment to persons. Rebates for individuals with tax liabilities that exceed the rebate amount are treated as an offset to personal current taxes in the NIPAs. Rebates for individuals who pay no income taxes (or for whom the rebate would exceed the amount of the income taxes they do pay) are treated as a government social benefit payment to persons in the NIPAs.

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