Archive for April, 2012

Personal Income Increased 0.4 Percent in March

Personal income in the United States increased 0.4 percent in March after increasing 0.3 percent in February. Wages and salaries rose 0.3 percent in March after rising 0.4 percent in February.

Current-dollar disposable personal income (DPI)—income after taxes—increased 0.4 percent in March after increasing 0.2 percent in February.

Real DPI—income adjusted for taxes and inflation—increased 0.2 percent in March after decreasing 0.1 percent in February.

Real consumer spending—spending adjusted for price changes—rose 0.1 percent in March after rising 0.5 percent in February, reflecting a decrease in durable goods spending that was more than accounted for by motor vehicles and parts.

Prices increased 0.2 percent in March after increasing 0.3 percent in February. Excluding food and energy, prices increased 0.2 percent in March after increasing 0.1 percent in February.

Personal saving as a percent of DPI was 3.8 percent in March, compared with 3.7 percent in February.

To learn more about personal income and outlays, read the full report.

First-Quarter GDP Defense Spending

In the first quarter of 2012, defense spending declined at an 8.1 percent annual rate, reflecting decreases in compensation of employees (accompanying a drop in the number of active-duty military personnel), in purchases of goods and services, and in investment for defense equipment. In contrast, based on defense outlays data in the Treasury Department’s Monthly Treasury Statement (MTS), some economic forecasters expected a smaller decrease or even an increase in defense spending, but this quarter’s MTS data on defense outlays were boosted by certain payments in the first quarter that reflected the timing of when bills were paid rather than the timing of when the actual purchases were made.

While the MTS records the cash outlays of the U.S. government, the Bureau of Economic Analysis (BEA) national accounts record defense spending on an accrual basis. In other words, the timing of expenditures recorded in gross domestic product (GDP) is intended to align with when the economic activity takes place. BEA routinely makes a number of timing adjustments, many of which are documented in the methodology paper, Government Transactions (MP–5).

In general, MTS data can be useful for tracking BEA’s defense consumption expenditures and gross investment, provided that users are aware of BEA’s adjustments to the MTS data and key methodological differences. The first quarter of 2012 is a case in point. MTS outlays for defense procurement increased in the first quarter; however, this increase was more than accounted for by an increase in Air Force procurement. Outlays for Army and Navy procurement fell. The increase to Air Force procurement outlays stemmed from a very large increase to Air Force “other” procurement. This account contains spending for noncombat vehicles, parts, small equipment, and other activities. This account is often volatile because of accounting practices rather than from actual fluctuations in procurement.

As a result, BEA’s analysts make timing adjustments for this account that spread this spending over the year based on the estimated fiscal year outlays from the federal budget (this adjustment may be thought of as a simple form of seasonal adjustment). Spreading the first-quarter spending related to the timing of payments for Air Force “other” procurement over the year removes the large spike in the first quarter that offset the declines in most other defense spending categories, resulting in the 8.1 percent decrease in the first quarter.

For more information on the relationship between the MTS and BEA’s estimates of federal government spending, see the box on page 6 of the February 2006 Survey of Current Business.

GDP Growth Slows in First Quarter

Real gross domestic product (GDP) increased 2.2 percent in the first quarter of 2012 after increasing 3.0 percent in the fourth quarter of 2011, according to estimates released today by the U.S. Bureau of Economic Analysis.

First-quarter highlights
The slower economic growth reflected slower growth in inventory and fixed investment by businesses:

• The deceleration in inventory investment was primarily due to reduced inventory investment in manufacturing and in wholesale industries. In contrast, inventory investment in retail industries increased, especially in motor vehicles and parts.

• The slower growth in fixed investment was mainly due to slowdowns in industrial equipment, in computer and related equipment, and in power and communication structures. These contributions to slower growth in GDP were partly offset by faster growth in consumer spending, mainly for services, and in services exports.

Prices
Prices of goods and services purchased by U.S. residents rose 2.4 percent after rising 1.1 percent. Energy prices turned up, while food prices slowed. Prices, excluding food and energy, rose 2.2 percent after rising 1.2 percent.

Personal income
Real disposable personal income—which adjusts personal income for changes in consumer prices and taxes—rose 0.4 percent in the first quarter versus 1.7 percent in the fourth quarter. The slower growth mainly reflected a 2.4 percent rise in consumer prices in the first quarter versus a 1.2 percent rise in the fourth quarter.

Personal saving
The personal saving rate—saving as a percentage of disposable personal income—was 3.9 percent in the first quarter, compared with 4.5 percent in the fourth quarter. The first-quarter saving rate was the lowest since the fourth quarter of 2007.

To learn more about GDP, read the full report.