Income and Spending

April Personal Income rose .5%, much better than expectations of a drop
of .2% while Spending fell .1%, .1% better than forecasts. The revisions
to March were modest. The factor in the surprise gain in income was
related to the Government’s stimulus plan where transfer payments rose
smartly and there was also reduced personal current taxes. The Commerce
Dept specifically said the income component “was boosted as a result of
provisions of the American Recovery and Reinvestment Act of 2009.” The
savings rate did rise to 5.7% from 4.5%, the highest since 1995 as a
result but it would have been nicer to see the gain come from legitimate
private sector income improvements. REAL spending fell .2% as the
headline PCE rose .1%. The core PCE rose .3% and the y/o/y gain rose to
the highest since Nov at 1.9%.

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