Real consumer spending falls 0.1%, third drop in past four months
By Rex Nutting, MarketWatch
WASHINGTON (MarketWatch) - Personal incomes of U.S. residents fell 1.3% in June, reversing the 1.3% gain in May that was due to a one-time stimulus payment to Social Security recipients, the Commerce Department reported Tuesday.
Excluding the one-time payment in May, incomes fell 0.1% in June after a decline of less than 0.1% in May. Incomes are down this year despite the on-going prop to incomes from the stimulus, including tax credits and expanded unemployment benefits.
The monthly report released Tuesday expands on information released last Friday with the benchmark revision to gross domestic product. The revisions show that incomes, spending and savings were all modestly higher in 2007 and 2008 than previously reported.
The recession, however, has been deeper than previously reported. GDP is down 3.9% from its peak, the largest economic contraction in the post-World War II era.
Most economists are forecasting an increase in GDP in the current quarter, largely because of a powerful swing in inventories and the possibility that residential investment has finally bottomed after falling for 14 straight quarters.
For households, however, the monthly report shows few signs of economic growth. The recession may linger even as GDP rises.
Real disposable incomes - adjusted for inflation and after taxes - fell 1.8% in June after a 1.5% gain in May. Disposable incomes are down 1% compared with a year earlier.
The personal savings rate fell back to 4.6% of disposable income in June from 6.2% in May. The savings rate has more than tripled since the beginning of the recession, as households pared back their spending and reduced their debts.
Compensation of workers fell 0.3% in June, the eighth straight decline, the government said.
Personal incomes are down 1.7% since the recession began 19 months ago. Compensation has fallen 2.8%.
Meanwhile, consumer spending rose 0.4%. After adjusting for inflation, real consumer spending dropped 0.1% in June, the third decline in the past four months. Real consumer spending is down 2% since the recession began.
In June, real spending on durable goods fell 0.2%, real spending on nondurables fell 0.4% and spending on services was unchanged.
Consumer prices increased 0.5% in June, the most in a year. Energy prices rose 8.3%. The core inflation rate - which excludes food at home and energy - rose 0.2%. In the past year, consumer prices have fallen 0.4%, while core prices are up 1.5%.
