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.