Have We Established a New Normal for Personal Savings?

The Bureau of Economic Analysis just announced in May personal income increased 0.4% while spending also popped to 0.2% from 0.0% in April. Interestingly, the Personal Savings Rate jumped to 4.0% — the highest reading since September 2009.

Have we firmly established a new normal in Personal Savings for at least the short term? Applying our trading technical analysis to the chart below, it seems we have new levels of support and resistance:

I stress the duration short term because once unemployment declines, we should see the cultural spending habits of Americans come back as fast as they slowed in late spring of 2008. (SeeThe Number One Reason the US Consumer Will Be Back“.) However, for now it’s worth noting the new normal.

Here is the complete release from the BEA:

Personal Income and Outlays, May 2010

Personal income increased $53.7 billion, or 0.4 percent, and disposable personal income (DPI) increased $49.0 billion, or 0.4 percent, in May, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $24.4 billion, or 0.2 percent. In April, personal income increased $59.4 billion, or 0.5 percent, DPI increased $63.7 billion, or 0.6 percent, and PCE increased $1.4 billion, or less than 0.1 percent, based on revised estimates.

Real disposable income increased 0.5 percent in May, compared with an increase of 0.6 percent in April. Real PCE increased 0.3 percent, in contrast to a decrease of less than 0.1 percent.

Wages and salaries

Private wage and salary disbursements increased $22.8 billion in May, compared with an increase of $28.5 billion in April. Goods-producing industries’ payrolls increased $10.3 billion, compared with an increase of $6.1 billion; manufacturing payrolls increased $7.8 billion, compared with an increase of $4.6 billion. Services-producing industries’ payrolls increased $12.6 billion, compared with an increase of $22.2 billion.

Government wage and salary disbursements increased $6.6 billion in May, compared with an increase of $2.5 billion in April. Census decennial temporary and intermittent workers boosted government wages and salaries by $5.7 billion in May.

Other personal income

Supplements to wages and salaries increased $4.6 billion in May, compared with an increase of $3.8 billion in April.

Proprietors’ income increased $6.5 billion in May, compared with an increase of $12.2 billion in April. Farm proprietors’ income increased $2.3 billion, the same increase as in April. Nonfarm proprietors’ income increased $4.2 billion in May, compared with an increase of $9.9 billion in April.

Rental income of persons increased $3.6 billion in May, compared with an increase of $2.1 billion in April. Personal income receipts on assets (personal interest income plus personal dividend income) increased $10.9 billion, the same increase as in April. Personal current transfer receipts increased $2.7 billion in May, compared with an increase of $3.3 billion in April.

Contributions for government social insurance — a subtraction in calculating personal income — increased $4.1 billion in May, compared with an increase of $3.9 billion in April.

Personal current taxes and disposable personal income

Personal current taxes increased $4.8 billion in May, in contrast to a decrease of $4.5 billion in April. Disposable personal income (DPI) — personal income less personal current taxes — increased $49.0 billion, or 0.4 percent, in May, compared with an increase of $63.7 billion, or 0.6 percent, in April.

Personal outlays and personal saving

Personal outlays — PCE, personal interest payments, and personal current transfer payments — increased $21.8 billion in May, in contrast to a decrease of $1.2 billion in April. PCE increased $24.4 billion, compared with an increase of $1.4 billion. Personal saving — DPI less personal outlays — was $454.3 billion in May, compared with $427.2 billion in April.

Personal saving as a percentage of disposable personal income was 4.0 percent in May, compared with 3.8 percent in April. 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 — increased 0.5 percent in May, compared with an increase of 0.6 percent in April.

Real PCE — PCE adjusted to remove price changes — increased 0.3 percent in May, in contrast to a decrease of less than 0.1 percent in April. Purchases of durable goods increased 1.1 percent, in contrast to a decrease of 0.5 percent. Purchases of motor vehicles and parts accounted for about half of the increase in durable goods in May and more than accounted for the decrease in April. Purchases of nondurable goods decreased 0.2 percent in May, in contrast to an increase of 0.1 percent in April. Purchases of services increased 0.3 percent, compared with an increase of 0.1 percent.

PCE price index — The price index for PCE decreased less than 0.1 percent in May, in contrast to an increase of less than 0.1 percent in April. The PCE price index, excluding food and energy, increased 0.2 percent, compared with an increase of 0.1 percent. Revisions Estimates have been revised for January through April. Changes in personal income, current-dollar and chained (2005) dollar DPI, and current-dollar and chained (2005) dollar PCE for March and April — revised and as published in last month’s release — are shown below.

Annual Revision of the National Income and Product Accounts

As part of the annual revision of the national income and product accounts (NIPAs), revised estimates of personal income and outlays covering January 2007 through May 2010 will be released along with estimates for June 2010 on August 3. Information about changes in the new release tables, the NIPA interactive tables, and the underlying detail tables is available on BEA’s Web site at www.bea.gov/national/an1.htm. An article describing the annual revision will appear in the August 2010 issue of the Survey of Current Business.

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