What’s all this nonsense about stagnant wages in the United States, workers losing ground to inflation etc? Wages and disposable income are growing nicely, with salaries up 7.6% in the past 12 months alone.
U.S. personal spending rose for a third straight month in April, boosted by rising incomes as hiring accelerated, according to a government report. A measure of prices tied to spending showed tame inflation.
The 0.6 percent increase in purchases followed a 0.9 percent gain in March that was stronger than initially estimated, the Commerce Department reported today in Washington. Incomes rose 0.7 percent after a 0.5 increase the previous month.
“It looks like we started off the second quarter in fine shape,” said Michael Gregory, a senior economist at BMO Nesbitt Burns Inc. in Toronto, before the report. “Consumers are being buoyed by relatively low interest rates and a pickup in job growth. The consumer sector is going to be the dominant one in the economy.”
The report’s price gauge tied to spending patterns and excluding food and energy costs, Federal Reserve policy makers’ preferred measure for tracking inflation, rose 0.1 percent last month and was up 1.6 percent from April 2004. The increase in prices is expected to keep central bankers raising their target interest rate by a quarter percentage point in coming months, economists said.
“The inflation picture seems likely to continue to support the Fed’s measured tightening for the balance of the year,” said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut, before the report.
Economists expected spending to rise 0.8 percent after a previously reported 0.6 percent March increase, according to the median of 66 estimates in a Bloomberg News survey. Incomes were forecast to rise 0.7 percent.
Incomes were up 7 percent last month from April 2004, paced by a 7.6 percent gain in wages and salaries. The Commerce Department revised the increase in wages and salaries in the 12 months ended in March to 7.6 percent, compared with a 5.8 percent gain estimated last month. The acceleration reflects revisions to the income components in yesterday’s report on gross domestic product.
“The increase in incomes is completely under-appreciated as a driver of the expansion,” said Steven Wieting, an economist at Citigroup Capital Markets Inc. in New York, before the report. “Increases in wages and other forms of income are enough to get us decent increases in consumer spending” even if gasoline prices hold near current levels, he said.
Disposable income, or the money left over after taxes, increased 0.5 percent in April following a 0.4 percent rise the previous month. Adjusted for inflation, personal spending rose 0.2 percent last month after a 0.4 percent rise.
