Washington, DC, October 30, 2006—Personal income growth picked up steam last month, while personal spending slowed and a key inflation indicator eased slightly.
Personal income grew in September at a seasonally adjusted rate of 0.5%, after increasing a revised 0.4% in August, the Commerce Department said Monday. August income growth was previously reported at 0.3%. Meanwhile, personal consumption grew 0.1% in September, less than the revised 0.2% increase the month before. August spending growth had previously been reported at 0.1%.
Get alerts for breaking news -- such as Fed moves, major world events and big mergers -- delivered straight to your desktop. Alerts will appear in a small window on your screen, much like an instant-messaging window. See a sample and get more information.The median forecast of economists surveyed by Dow Jones Newswires and CNBC was for a 0.4% increase in personal income in September, while consumer spending was expected to grow 0.2%.
The core price index for personal consumption expenditures -- or PCE -- excluding food and energy, increased by 0.2% in September, slower than August's revised 0.3% growth, previously reported as a 0.2% increase. The September core rate matched Wall Street expectations. Overall PCE inflation, including food and energy, fell 0.3% in September after growing 0.3% in August.
Compared with a year earlier, the core PCE price index grew 2.4% last month. September's year-over-year rate was slightly less than the 2.5% pace in August. Core PCE is an important inflation indicator for the central bank.
Monetary policymakers at the Federal Reserve expect recently elevated inflation to moderate as a result of a slowing economy and diminishing pressure from energy prices. Last week the Fed held short-term interest rates unchanged for its third straight policy-setting meeting, but it also left the door open to further credit tightening.
Monday's report shows that within total income figures, wages and salaries grew 0.5% in September, more than twice the 0.2% rate of growth the previous month. Income from interest on debt holdings and equity dividends increased 0.5% in September for the second straight month.
After-tax income, also known as disposable personal income, expanded 0.5% in September, matching the pace of the previous month.
Within the spending data, spending on durable goods -- those designed to last three years or longer -- grew 1.6% in September, after a 1.4% decline in August. Non-durable goods spending fell 1.2% last month after a 0.2% gain the previous month. September spending on services increased 0.5% for the third straight month.
Personal saving as a percentage of disposable personal income was negative 0.2% last month, marking the 18th straight month that this measure of savings has been in the red.
