Savings And Income Decline – US-FOREX.US
Americans are strapped for cash, as personal income flattened in June while gas prices rose, further tightening the grip many individuals and families feel from mortgage payments, credit card bills and a weak labor market.The lift in May income from the one-time Social Security stimulus payments has long past and personal income fell to 1.3% in June. Income growth was also stymied by labor compensation, which itself fell 0.3%. Personal income dropped 1.8% accounting for inflation and taxes. An increasing amount of Americans have been running out of options, as jobless benefits become exhausted. Much of the personal income data were already included in Friday’s second-quarter gross domestic product report, but Tuesday’s release sheds more light on the monthly pattern of spending and income. Consumer spending, when excluding the affects of inflation, fell 0.1% in June. Nominal consumer spending though rose 0.4%, a little stronger than expectations, yet much of the bump was due to higher gas prices.Weak spending has touched every aspect of the U.S. economy, and will continue to do so as it slowly recovers, and major firms from Walt Disney
to Alcoa
to American Express
have all had to contend with weak demand.Personal savings also dropped to 4.6% in June, from 6.2% in May, due to the combination of weaker income, as well as higher nominal spending. Most analysts have forecast a long-term rise in personal savings in the U.S. as well as depressed consumption and slower growth because of it. But the June drop suggests that absent government stimulus money, the American consumer really can’t save much more and that the rise in savings rates might be less a sign of a new thriftiness than it is a short-term tendency to hoard anything extra that comes in.”The monthly up-and-down pattern in the saving rate over the course of the second quarter reflects nothing more than consumer smoothing through transitory income fluctuations-in this case, due to the one-time stimulus payments,” said Mike Feroli, senior economist at JPMorgan Chase.
The Personal Consumption Expenditure price index rose 0.5% in June, again due to higher gas prices. Excluding food and energy, the index increased 0.2%, and only 1.5% on a year-to-year basis.