Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Download PersonalIncome
Document related concepts
Transcript
Personal Income and Spending Published by: Bureau of Economics Analysis (BEA) Frequency: monthly Period Covered: prior month Market significance: moderate to high Web site: www.bea.gov What is the Personal Income and Spending? Records the income Americans receive, how much they spend, and what they save Personal Consumption Expenditure (PCE) is the largest component of the GDP 25% 75% Other components PCE This report is broken into three main categories: • Personal Income • Personal Spending • Personal Savings Personal Income Personal Income represents the money households receive before taking out taxes. It is also known as Disposable Personal Income (DPI) Major sources of income • • • • • • • Wages and Salaries Proprietors’ Income Rental Income Dividend Income Interest Income Transfer payments 13% Other labor Income 56% 8% 1.4% 4.4% 11% 6.2% *Profits households receive from the sale of assets such as stock, bonds, or real state are excluded from personal income. Personal Spending Formally known as: • Personal Consumption Expenditures Personal Consumption Expenditures accounts for 2/3 of all economic activity, because of this is that changes in PCE can lead to major shifts in the business cycle. Personal Consumption Expenditures include: • Durable Goods Expensive items that usually last more than 3 years • Non-durable Goods 30% Items that last less than 3 years. Food, clothing can be included here. • Services 12-14% 60% There has been a jump from 40%-60% in the past 40 years. Personal Savings What is left over after spending on goods, services, and interest payments on credit cards and loans. Money that usually ends up in savings deposits, bank CD’s, money market accounts, stocks, and bonds. Personal Savings Rate, the percentage of disposable personal income that is saved. • 1960’s • 2000’s above 8% below 3% Importance of this Indicator Consumers rule the economy. Consumer expenditures are the main driving force of sales, imports, factory output, business investments and job growth in the US. Besides inflation, personal Income can have a great impact on when and how much consumers spend. Keys to Interpret this Indicator Changes in household wealth play an important role in determining consumer spending behavior • It is believed that for every dollar increase in the value of one’s stock portfolio, consumers spend an additional 3-6 cents. Year-end wages and salary amounts can be distorted due to companies that distribute bonuses. The increase of disposable personal income in comparison to inflation. Any change in in spending behavior has a notorious impact on the overall economy If interest payments exceed 2%-2.5% over a prolonged period of time, it might indicate that households are experiencing financial stress. Abrupt movements in the personal savings rate can indicate a growing concern among households over their financial future. A sudden increase in the savings rate means that people are becoming nervous about their income and job security, just as a sharp fall in the personal savings rate can be troubling as well. Rising wages and job stability stimulate orders for durable goods. • Orders for durable goods can be an important indicator of a recession 6-12 months before or they can be the turning point one or two months before a recession ends and recovery begins. By looking at changes in PCE for three-month period it is possible to see how the GDP will do in the current quarter and beyond. Latest Release for March 2007 Data Analysis Based on the information from this indicator, we conclude: • There is a slight increase in income that might lead to an increase on spending. • The negative change in PCE might mean that something is ahead in the economy, it is recommended to pay attention to PCE in the following months. • Personal Saving Rate has declined in the past months, it might be an indication that households might have a concern about their financial future. The economy seems to be at a stable stage, however there are some signs that the economy might slow down.
