Real disposable personal income rose as personal consumption income decline by $27.9 billion

Personal income in the United States (US) rose by $116.6 billion or 0.6 per cent in December 2020, based on the just estimates by the US Bureau of Economic Analysis (BEA).

At the same time disposable personal income (DPI) rose $111.6 billion or 0.6 per cent while personal consumption expenditures (PCE) fell by $27.9 billion or 0.2 per cent. Real DPI climbed 0.2 per cent in December as Real PCE fell by 0.6 per cent.

The data by the US BEA showed that PCE price rose 0.4 per cent. The PCE price index, minus food and energy, increased by 0.3 per cent. The bureau reports that “the rise in personal income in December was primarily attributed to the increases in government social benefits, compensation and personal dividend income that were partly offset by a decline in proprietors’ income”.

The latest estimates revealed that “within government social benefits, unemployment insurance increased reflecting an increase in pandemic unemployment compensation, the supplemental weekly payments to unemployment beneficiaries re-introduced through the CRRSA Act”.

The Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act, which legislates a $900-billion relief package providing a second round of financial aid to workers, families and businesses impacted by the pandemic as well as funding to aid in the distribution of COVID-19 vaccines. 

Increases reflected in other social benefits

The BEA reports that “there was also an increase in ‘other’ social benefits, reflecting an increase in payments from the Provider Relief Fund to nonprofit institutions. Within compensation, the main contributor was an increase in wages and salaries in service-producing industries based on data from the Bureau of Labor Statistics Current Employment Statistics”.

The increase in personal dividend income reflected data from company financial reports. Within proprietors’ income, both farm and non-farm decreased based on declines in Paycheck Protection Program loans to businesses.

Farm proprietors’ income was also impacted by a decrease in payments under the Coronavirus Food Assistance Program. In December, the real PCE fell by $79.8 billion, revealing a $71.9 billion decrease in spending for goods and a $17.6 billion decrease in spending on services.

Within goods, spending on durable goods and nondurable goods were the main contributor to the decline. Notably, this was partly offset by an increase in spending for motor vehicles and parts led by new light trucks.

Leading contributors within the services sector

Within services, the leading contributors to the decrease were spending on food services and accommodations as well as in spending for health care led by hospitals but was partly tempered by a rise in spending for household utilities. Personal outlays fell $39.2 billion in December while personal saving was $2.38 trillion, and the personal saving rate, which is personal saving as a percentage of disposable personal income, stood at 13.7 per cent.