U.S. Personal Income Surges

Personal spending slowed in June while income gains accelerated, the Commerce Department said Friday. Prices consumers paid fell slightly in the month.

The report should cheer financial markets looking for signs of a slowdown in consumer spending and for confirmation that inflation is not yet a problem. (Spending rose at a 4 percent annual rate in the quarter, down from 6.7 percent in the first quarter.)

Personal incomes rose 0.7 percent in June to a seasonally adjusted annual rate of $7.49 trillion a year, disposable incomes also rose 0.7 percent to $6.31 trillion and spending rose 0.3 percent to $6.17 trillion. All figures are in current dollars (not adjusted for inflation, or in this case, deflation).

The gain in incomes was the biggest since November. The increase in spending was the lowest since November.

Spending on durable goods was statistically unchanged in June at an annual rate of $783.3 billion, largely due to a decline in spending on autos, the department said. Spending on nondurable goods rose 0.4 percent to $1.78 trillion and spending on services rose 0.3 percent to $3.61 trillion.

The personal savings rate remained below water at a negative 1 percent.

A panel of economists surveyed by CBS.MarketWatch.com expected incomes to rise 0.6 percent and for spending to rise 0.4 percent.

The implicit price deflator for personal consumption expenditures, which many economists believe is a better gauge of inflation than the Consumer Price Index, fell by a statistically insignificant amount in June, the first decline since November. The CPI was also flat in June.

When adjusted for price changes, spending rose 0.4 percent in real terms.

On the income side, wages and salaries rose $21.9 billion with big gains in services and distribution. A gain in farmers' income boosted proprietors' income by $18.9 billion. Rental, dividend and interest income rose at modest rates. Transfer payments rose $3.1 billion.

Written by Rex Nutting, Washington bureau chief for CBS MarketWatch