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Calendar Boosts May Incomes; Spending Increases

With a boost from the calendar, personal income rose 0.5 percent in May--faster than economists had forecast--while personal consumption went up an unsurprising 0.3 percent the ""Bureau of Economic Analysis"":http://bea.gov/newsreleases/national/pi/2013/pdf/pi0513.pdf (BEA) reported Thursday.


Data for April was revised to show income grew $18.3 billion instead of the originally reported $5.6 billion decline. Data on spending for April was unchanged.

Government transfer payments--primarily Social Security--accounted for $19.2 billion of the $69.4 billion monthly increase in spending. Since June 1 fell on a Saturday, Social Security payments were distributed on Friday, May 31. Social Security payments can fluctuate in months that begin on a weekend, with payments accelerated to the last business day of the previous month.

Compensation--including wages and salaries--went up $24 billion in May after a weak $9.1 billion increase in April.

Farm income, which had been a drag on personal income in April, dropped again in May, down $6.7 billion as farmers struggle with crop-destroying heavy rains following a crippling drought. The April decline in farm income--revised to $6.7 billion--was the first month-over-month decline in farm income since December, when it fell $1.0 billion. Farm income in May 2012 grew $0.6 billion.

Unemployment insurance payments--which were affected by the sequester cuts that took effect at the end of March--were down $23.6 billion from May 2012 to $60 billion.

Disposable personal income (essentially after-tax income) rose $57 billion in May month, but with consumer spending up $28.5 billion, personal savings increased to $387.6 billion--or 3.2 percent--of disposable income compared with 3.0 percent in April.

Personal consumption fell $49.6 billion in April, which means for the first two months of the quarter, spending--which represents about 70 percent of Gross Domestic Product (GDP)--was down a net $10.6 billion, suggesting a weak GDP report for the second quarter.

Personal spending on goods increased $22.3 billion in May after dropping $5.1 billion in April. Spending on services fell $4.3 billion in May after falling the same amount in April.

Spending on durable goods--a sign of confidence because they are usually financed with borrowing--rose $14 billion in May after increasing just $2.5 billion in April. Spending on non-durable goods rose $10.2 billion in May after dropping $6.3 billion in April.

With interest rates remaining low, personal interest payments on non-real estate related debt fell $0.5 billion in May.

The personal consumption expenditure (PCE) price index--the Federal Reserve's preferred measure of inflation since it measures actual spending, not prices--rose 0.1 percent in May compared with a 0.3 percent decline in April. The year-over-year PCE inflation rate was 1.0 percent in May compared with 0.7 percent in April.

The core PCE price index (excluding food and energy) rose 0.1 percent in May after no change in April. The core PCE inflation rate was 1.1 percent in May, unchanged from April.

_Hear Mark Lieberman next Friday on P.O.T.U.S. Radio, Sirius-XM 124, at 6:20 a.m. Eastern._

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.

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