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Savings Rate Climbs To 4%, Highest Since September 2009, Even As Spending And Income Both Miss Expectations

Tyler Durden's picture





 

The BEA's May Personal Income and Spending data is out - as expected, with gizmos like the iPad out there, Americans once again outspent themselves: May Income came in at 0.4%, below expectations of 0.5%, flat with a revised April reading of 0.5%; Spending on the other hand was greater than expectations of 0.1%, coming in at 0.2%, compared to a previous reading of 0.0%. Yet despite the excess spending, the Personal Savings rate climbed to 4.0% - an increase from last month's revised 3.8%, and the highest since September 2009.

Summary from the BEA:

Personal income increased $53.7 billion, or 0.4 percent, and disposable personal income (DPI) increased $49.0 billion, or 0.4 percent, in May, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $24.4 billion, or 0.2 percent.  In April, personal income increased $59.4 billion, or 0.5 percent, DPI increased $63.7 billion, or 0.6 percent, and PCE increased $1.4 billion, or less than 0.1 percent, based on revised estimates.

Real disposable income increased 0.5 percent in May, compared with an increase of 0.6 percent in April.  Real PCE increased 0.3 percent, in contrast to a decrease of less than 0.1 percent.

Personal outlays -- PCE, personal interest payments, and personal current transfer payments -- increased $21.8 billion in May, in contrast to a decrease of $1.2 billion in April.  PCE increased $24.4 billion, compared with an increase of $1.4 billion.

Personal outlays -- PCE, personal interest payments, and personal current transfer payments -- increased $21.8 billion in May, in contrast to a decrease of $1.2 billion in April.  PCE increased $24.4 billion, compared with an increase of $1.4 billion.

Personal saving -- DPI less personal outlays -- was $454.3 billion in May, compared with $427.2 billion in April. Personal saving as a percentage of disposable personal income was 4.0 percent in May, compared with 3.8 percent in April.  For a comparison of personal saving in BEA’s national income and product accounts with personal saving in the Federal Reserve Board’s flow of funds accounts and data on changes in net worth, go to http://www.bea.gov/national/nipaweb/Nipa-Frb.asp.

Here is Goldman's spin:

BOTTOM LINE: Personal income posts a solid gain in May, though less than expected, while spending rises modestly. Core price inflation remains subdued.

US-MAP:
Personal Spending +1 (1, +1).

KEY NUMBERS:
Personal income +0.4% in May (mom, +1.6% yoy) vs. GS +0.6%, median forecast +0.5%.
Personal spending +0.2% in May (mom, +4.6% yoy) vs. GS +0.2%, median forecast +0.1%.
PCE core price index +0.16% in May (mom, 1.3% yoy) vs. GS +0.15%, median forecast +0.1%.

MAIN POINTS:

1. Although personal income rose less in April than expected, it was a solid increase in the sense that wages and salaries rose 0.5%. Personal spending grew in line with our expectation, up 0.2% (and 0.3% in real terms). As a result, the saving rate increased by two tenths to 4.0%. A comparison of the level of real spending in April with the first quarter average suggests a firm increase in Q2 - about 3% at an annual rate.

2. The price components of this report contained no meaningful surprises. The increase in the core index was slightly to the high side of the 0.1% median forecast, but in line with our own forecast. While the year-to-year trend rose slightly to a "low" 1.3%, deceleration is likely in coming months.

 


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Mon, 06/28/2010 - 09:03 | Link to Comment papaswamp
papaswamp's picture

People got caught without any savings....too bad the bank rates blow.

 

Mon, 06/28/2010 - 09:38 | Link to Comment firstdivision
firstdivision's picture

The beauty will be when all those that just got kicked off of FUNemployment have to sell all the worthless overprice Apple crap they bought.  Next months numbers will be dismal now with less discretionary spending taking place.  It is shaping up to be a great summer, almost reminiscent of 08's. 

OT: So I have been supporting the site by clicking on the ads that have been appearing...and I love the new Russian Bride ad TD.  I must admit that I looked at the girls on the site ;)

Mon, 06/28/2010 - 09:15 | Link to Comment dehdhed
dehdhed's picture

i don't get it.  if once again as expected, americans outspent themselves .. how did savings go up?

was the comment because spending was greater than expected?

or is overall spending still greater than income?

but why did savings rate go up?

the comment about overspending wasn't self-explanatory to me and would appreciate any clarity ... thanks in advance

Mon, 06/28/2010 - 09:25 | Link to Comment dehdhed
dehdhed's picture

for some reason, when i first read this article, the here's the goldman spin wasn't visible to me.

i guess yoy kinda explains overspending, but doesn't quite make obvious the once again analysis

Mon, 06/28/2010 - 12:13 | Link to Comment thesapein
thesapein's picture

I'm one of those over-spenders who blew my entire dollar savings on purchasing gold and silver. Now, I'm stuck with no savings account and just some worthless metal that I can't eat or have sex with.

Mon, 06/28/2010 - 09:18 | Link to Comment Chemba
Chemba's picture

I find it more than somewhat disingenous that Goldman Sachs is relentlessly shat upon for "bad FX trades" or whatever, while at the same time relied upon for insightful commentary on the economic data.

Mon, 06/28/2010 - 09:26 | Link to Comment schoolsout
schoolsout's picture

I read the "here is Goldman's Spin" part and thought differently

Mon, 06/28/2010 - 09:55 | Link to Comment mephisto
mephisto's picture

That was not meant to be taken as insightful commentary. It's useful to see how the big houses spin bad errors.

GS predicted +0.6%, consensus +0.5%, result +0.4%. The whole GS piece is "We did not fuck up. If you lost money on this, you fucked up. Not us. Have a nice day."

Mon, 06/28/2010 - 09:41 | Link to Comment jkruffin
jkruffin's picture

Gotta love this.  They tried desperately to pump this marekt up using Census jobs in the unemployment data to disguise how bad it is,  and now they do a 180 reverse and say don't count the 1/4 million jobs lost in June from Census exits, to keep trying to pump the markets up.  You can't have it both ways.  ROFL

 

In May, the Census hired 410,000 temporary workers, helping to boost payrolls by 431,000, the largest gain in 10 years. In June, the government laid off nearly a quarter million of those temps.

After subtracting all the layoffs in the government sphere and adding a modest gain in private-sector payrolls, total U.S. nonfarm payrolls are expected to fall by about 115,000 in June, according to the median forecast of our survey. It would be the first loss since December.

The focus should remain on private-sector payrolls, however.

Mon, 06/28/2010 - 09:47 | Link to Comment DoctoRx
DoctoRx's picture

Russian girl pics?  Can't wait for the ad to reappear . . .

Beats Goldman spin

Mon, 06/28/2010 - 10:05 | Link to Comment Coast Watcher
Coast Watcher's picture

Doesn't "savings" also include paying down debt, including credit cards?

Mon, 06/28/2010 - 12:09 | Link to Comment thesapein
thesapein's picture

Another reason these numbers are lame. If you bought gold jewelry, that would be considered consumer spending. If you held dollars while they lost value, you saved!!!

Mon, 06/28/2010 - 13:10 | Link to Comment JR
JR's picture

reposted on BIS

Mon, 06/28/2010 - 12:04 | Link to Comment thesapein
thesapein's picture

What if people are trading dollars for things like gold, silver, or anything that works better than a cash "savings" account? Spending vs. saving numbers are warped in this casino circus.

Saving dollars is plain stupid, but that seems to be what the talking heads want. What we really want to see is "spending" going up and "savings" going down, which would mean people are exiting the dollar.

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