U.S. January Personal Income and Spending (Text)

Following is the text from the U.S. personal income and spending report released by the Commerce Department.

Personal income decreased $505.5 billion, or 3.6 percent, and disposable personal income (DPI) decreased $491.4 billion, or 4.0 percent, in January, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $18.2 billion, or 0.2 percent. In December, personal income increased $353.4 billion, or 2.6 percent, DPI increased $325.7 billion, or 2.7 percent, and PCE increased $14.8 billion, or 0.1 percent, based on revised estimates.

Real disposable income decreased 4.0 percent in January, in contrast to an increase of 2.7 percent in December. Real PCE increased 0.1 percent, the same increase as in December.

The 4.0 percent decrease in January DPI mainly reflected the effect of special factors, which boosted employee contributions for government social insurance in January and which had boosted wages and salaries and personal dividends in December. Excluding these special factors and others, which are discussed more fully below, DPI increased $37.6 billion, or 0.3 percent in January, after increasing $38.6 billion, or 0.3 percent, in December.

This news release presents revised estimates of wages and salaries, personal taxes, and contributions for government social insurance for July through September 2012 (third quarter). These estimates reflect the incorporation of newly available third-quarter wage and salary tabulations from the quarterly census of employment and wages from the Bureau of Labor Statistics.

Wages and salaries

Private wage and salary disbursements decreased $44.8 billion in January, in contrast to an increase of $49.1 billion in December. The January level of private wages and salaries was reduced by $15.0 billion (at an annual rate) in January, after a boost of $30.0 billion in December, reflecting the impact of accelerated bonuses in anticipation of changes to individual income tax rates. Goods producing industries’ payrolls decreased $3.3 billion in January, in contrast to an increase of $9.8 billion in December; manufacturing payrolls decreased $3.3 billion, in contrast to an increase of $5.4 billion. Services-producing industries’ payrolls decreased $41.5 billion, in contrast to an increase of $39.3 billion.

Government wage and salary disbursements increased $1.1 billion, compared with an increase of $0.8 billion. Pay raises for military personnel added $1.9 billion to government payrolls in January.

Other personal income

Employer contributions for employee pension and insurance funds increased $3.2 billion in January, compared with an increase of $3.0 billion in December.

Employer contributions for government social insurance increased $2.7 billion in January, compared with an increase of $3.7 billion in December. The January estimate reflected increases in the social security taxable wage base (from $110,100 to $113,700), in the tax rate paid by employers to state unemployment insurance, and in employer contributions for the federal unemployment tax and for pension guaranty; together, these changes added $5.9 billion to January. (Changes in employer contributions for government social insurance do not affect personal income, because employer contributions for government social insurance are also included in total contributions for government social insurance, which is a subtraction in the calculation of personal income.)

Proprietors’ income increased $6.3 billion in January, compared with an increase of $7.3 billion in December. Farm proprietors’ income increased $4.9 billion, in contrast to a decrease of $0.8 billion. Nonfarm proprietors’ income increased $1.4 billion, compared with an increase of $8.1 billion.

Rental income of persons increased $11.2 billion in January, compared with an increase of $1.3 billion in December. Personal income receipts on assets (personal interest income plus personal dividend income) decreased $365.5 billion, in contrast to an increase of $273.8 billion. The level of personal dividend income was reduced $81.0 billion in January (at an annual rate), after a boost of $291.0 billion in December, reflecting accelerated and special dividend distributions paid in December; these adjustments reflected the impact of expected changes to individual income tax rates. For additional information, see the FAQ on “How would special and accelerated dividends affect the national income and product accounts in the fourth quarter 2012?” at www.bea.gov.

Personal current transfer receipts increased $7.0 billion in January, compared with an increase of $20.7 billion in December. The January estimates of current transfer receipts reflected 1.7-percent cost-of-living adjustments to social security benefits and to several other federal transfer payment programs; together, these changes added $15.2 billion to the January increase. The January change in social security benefits to persons was reduced by lump-sum payments, which had added $7.0 billion to December; these benefit payments resulted from a recalculation of the earnings base underlying the benefits for recent retirees.

Contributions for government social insurance -- a subtraction in calculating personal income --increased $126.7 billion in January, compared with an increase of $6.3 billion in December. The January estimate reflected increases in both employer and employee contributions for government social insurance. The January estimate of employee contributions for government social insurance reflected the expiration of the “payroll tax holiday,” that increased the social security contribution rate for employees and self-employed workers by 2.0 percentage points, or $114.1 billion at an annual rate. For additional information, see FAQ on “How did the expiration of the payroll tax holiday affect personal income for January 2013?” at www.bea.gov. The January estimate of employee contributions for government social insurance also reflected an increase in the monthly premiums paid by participants in the supplementary medical insurance program, in the hospital insurance provisions of the Patient Protection and Affordable Care Act, and in the social security taxable wage base; together, these changes added $12.8 billion to January. As noted above, employer contributions were boosted $5.9 billion in January, so the total contribution of special factors to the January change in contributions for government social insurance was $132.8 billion.

Personal current taxes and disposable personal income

Personal current taxes decreased $14.0 billion in January, in contrast to an increase of $27.6 billion in December. The January change reflected additional taxes paid on accelerated income distributions in December. Payments of final settlements and back taxes less refunds in Federal net nonwithheld income taxes reduced the January change by $3.4 billion, based on the Office of Tax Analysis projections. Indexation provisions of current tax law reduced federal withheld income taxes by $1.4 billion in January.

Disposable personal income (DPI) -- personal income less personal current taxes -- decreased $491.4 billion, or 4.0 percent, in January, in contrast to an increase of $325.7 billion, or 2.7 percent in December.

Personal outlays and personal saving

Personal outlays -- PCE, personal interest payments, and personal current transfer payments --increased $22.0 billion in January, compared with an increase of $13.3 billion in December. PCE increased $18.2 billion, compared with an increase of $14.8 billion.

Personal saving -- DPI less personal outlays -- was $283.9 billion in January, compared with $797.4 billion in December. The personal saving rate -- personal saving as a percentage of disposable personal income -- was 2.4 percent in January, compared with 6.4 percent in December. For a comparison of personal saving in BEA’s national income and product accounts with personal saving in the Federal Reserve Board’s flow of funds accounts and data on changes in net worth, go to http://www.bea.gov/national/nipaweb/Nipa-Frb.asp.

Real DPI, real PCE and price index

Real DPI -- DPI adjusted to remove price changes -- decreased 4.0 percent in January, in contrast to an increase of 2.7 percent in December.

Real PCE -- PCE adjusted to remove price changes -- increased 0.1 percent in January, the same increase as in December. Purchases of durable goods decreased 0.8 percent in January, in contrast to an increase of 1.3 percent in December. Purchases of motor vehicles and parts accounted for most of the decrease in January. Purchases of nondurable goods increased 0.3 percent in January, compared with an increase of 0.1 percent in December. Purchases of services increased 0.3 percent, in contrast to a decrease of less than 0.1 percent.

PCE price index -- the price index for PCE increased less than 0.1 percent in January, in contrast to a decrease of less than 0.1 percent in December. The PCE price index, excluding food and energy, increased 0.1 percent, compared with an increase of less than 0.1 percent.

2012 Personal Income and Outlays

Personal income increased 3.5 percent in 2012 (that is, from the 2011 annual level to the 2012 annual level), compared with an increase of 5.1 percent in 2011. DPI increased 3.3 percent, compared with an increase of 3.8 percent. PCE increased 3.7 percent, compared with an increase of 5.0 percent.

Real DPI increased 1.5 percent in 2012, compared with an increase of 1.3 percent in 2011. Real PCE increased 1.9 percent, compared with an increase of 2.5 percent.

Revisions Estimates of personal income and DPI have been revised for July through December; estimates for PCE have been revised for October through December. Changes in personal income, current dollar and chained (2005) dollar DPI, and current-dollar and chained (2005) dollar PCE for November and December -- revised and as published in last month’s release.

Estimates of wages and salaries were revised from July through December. The revision to third quarter wages and salaries reflected the incorporation of the most recently available BLS tabulations of the third-quarter wages and salaries from the quarterly census of employment and wages. Revised estimates for October, November, and December reflect extrapolations from the revised third-quarter level of wages. In addition, revisions to November and December reflect revised BLS employment, hours, and earnings data.

* * * Next release - March 29, 2013 at 8:30 A.M. EDT for Personal Income and Outlays for February

SOURCE: U.S. Commerce Department. http://www.bea.gov

To contact the reporter on this story: Kristy Scheuble in Washington at kmckeaney@bloomberg.net

To contact the editor responsible for this story: Marco Babic at mbabic@bloomberg.net

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