Friday, June 30, 2006

Consumer Spending Up 0.4%, Savings Rate Down 1.7%

From Bloomberg:

U.S. May Personal Spending Rises 0.4%; Core Prices Up 0.2%

Consumer spending in the U.S. rose 0.4 percent, the smallest increase in three months, and inflation held above the Federal Reserve's preferred range.

The rise in spending follows a 0.7 percent April gain, the Commerce Department said in Washington. Over the last three months, the increase in the department's measure of inflation that's favored by the Fed matched the biggest in a decade.
...
The report also showed incomes rose 0.4 percent, more than expected, after a 0.7 percent increase that was larger than the government reported last month. The May rise reflected a jump in proprietors' income, while wages were unchanged from a month earlier.

The report's price gauge tied to spending patterns and excluding food and energy costs, the Fed's preferred measure, rose 0.2 percent in May and was up 2.1 percent from the same month last year.
...
The core rate was up at an annual rate of 2.9 percent over the last three months, matching the year-over-year rise in April 2004 as the biggest in a decade. Bernanke is among policy makers who have said a rate of 1 percent to 2 percent is acceptable.
...
The savings rate fell to minus 1.7 percent, from minus 1.6 percent in April. A negative rate suggests consumers are dipping into savings to maintain spending.


From the BEA:

PERSONAL INCOME AND OUTLAYS: MAY 2006 (PDF)

Personal income increased $38.3 billion, or 0.4 percent, and disposable personal income (DPI) increased $31.6 billion, or 0.3 percent, in May, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $40.3 billion, or 0.4 percent. In April, personal income increased $76.2 billion, or 0.7 percent, DPI increased $52.4 billion, or 0.6 percent, and PCE increased $65.3 billion, or 0.7 percent, based on revised estimates.
...
Personal saving -- DPI less personal outlays -- was a negative $162.9 billion in May, compared with a negative $153.5 billion in April. Personal saving as a percentage of disposable personal income was a negative 1.7 percent in May, compared with a negative 1.6 percent in April. Negative personal saving reflects personal outlays that exceed disposable personal income. Saving from current income may be near zero or negative when outlays are financed by borrowing (including borrowing financed through credit cards or home equity loans), by selling investments or other assets, or by using savings from previous periods. For more information, see the FAQs on “Personal Saving” on BEA’s Web site.

49 Comments:

Blogger patient homebuyer said...

This comment has been removed by a blog administrator.

6/30/2006 08:01:00 AM  
Blogger grim said...

patienthb,

You can repost that email, but please remove the contact information from the bottom.

grim

6/30/2006 08:05:00 AM  
Anonymous Anonymous said...

SOME PRICE DROPS FROM PRESTIGIOUS Harding Township:

MLS#: 2061218 from $3.2 Million to $2.4 Million been on the market for 3 months ($800,000 drop)

MLS#: 2255654 from $2.595 million to $2.195 been on the market for 3+ months ($400,000 drop)

MLS#: 2086707 from $1.795 mil to 1.595 mil listed JUST OVER ONE YEAR
(took this seller one year to drop $200,000, chasing the market)

MLS#: 2270328 from $1.838 mil to 1.695 mil listed two months ($138,000 drop)

MLS#: 2256702 from $1.75 mil to 1.65 mil listed two months ($100,000 drop)

MLS#: 2292695 from $2.395 mil to 2.295 mil listed one week ($100,000 drop)

MLS#: 2267860 from $2.199 mil to 2.099 mil listed two months ($100,000 drop)

My wife and I watch harding and its obvious that the high end is not selling at all. The house at 9 post road which has been on over a year is still overpriced by $400,000.

IT PAYS TO WAIT PEOPLE, THESE WILL KEEP DROPPING.

Stan

6/30/2006 08:10:00 AM  
Blogger patient homebuyer said...

sorry grim
look at this email i got for a place in long island city queens
these people are a day late and too many dollars short

Sorry, I forgot the price in my previous e-mail (long day).



Hi,



Reduced sales near Vernon Blvd and Citylights:



1BR with Terrace: Interior SF 785, Exterior SF 408, CC $585, RET $77 - $575K

2BR Split Layout Corner Unit with Balcony: Interior SF 1135, Exterior SF 192, CC $774, RET $101 - $689K



Only 3 units. Call for an appointment ASAP.

6/30/2006 08:19:00 AM  
Anonymous Anonymous said...

Incomes are up for most people, but the savings rate continues to fall.

If you are like most people in the NYC Metro area, you earn between $150,000 - $200,000 a year, but can't save $1.00 a week.

BTW, yesterdays rate increase was negated by the fact that the market rose by 200 points, 10 year treasury yield is falling, and retail sales are still running 10% over last year (more in the NYC metro area).

6/30/2006 08:23:00 AM  
Blogger Richard said...

savings rate continues to go further negative. i guess everyone is banking on their house and stock market to provide their retirement. problem is the value of both aren't sure things. a black monday can wipe out a sizable portion of your stock market holdings while real estate while historically has fared well has more risk to the downside today. if you want to be prudent get yourself some cold hard cash and stuff it into the mattress like prior generations did.

6/30/2006 08:24:00 AM  
Anonymous Anonymous said...

Right and all these 20 something renters paying $2,000 a month for a studio in Manhattan are betting on their "house & home equity"..

Is that where they get the money for clothes, drinks, clubs & their rent every month, or are they are all e millionaires, make $400,000/yr or have huge trust funds?? Judging by most, probably all three.

Get real, it is all thrown on a credit card then tranfered from card to card.

6/30/2006 08:37:00 AM  
Anonymous UnRealtor said...

Here's a real estate tax question:

If the value of a property is assessed at $500K by the town, and you purchase it for $400K, can you ask the town to revise their assessed value to reflect the $400K sale, which would lower your annual property tax?

I suspect we'll be seeing this come up (selling below assessed value) with increasing frequency in the coming year or two.

6/30/2006 08:40:00 AM  
Anonymous Anonymous said...

I'm troubled by what these statistics reveal about the psychology of the average American citizen. Why does hardly anyone save or perceive the need to maintain a personal financial safety net?

The mass media's overall soporific effect and constant barrage of feel-good, buy-more advertising is at least partially to blame for this.

The apparently widespread notion that the type of financial devastation witnessed in the 1930s could never happen again is dangerously delusional, IMO.

JDP

6/30/2006 08:42:00 AM  
Blogger grim said...

From Calculated Risk:

Monthly Personal Savings Rate

Keep an eye on that graph. If the savings rate spikes upwards and holds, the economy is going to be in a world of trouble. The personal savings rate needs to increase significantly, but it's got to get there slow and steady. A quick reversion upwards would most certainly be coupled with a sharp drop in consumer spending and ultimately GDP.

grim

6/30/2006 09:05:00 AM  
Blogger grim said...

Two more economic indicators out this morning.

Michigan Sentiment and the Chicago PMI.

Mich, a gauge of consumer sentiment, came in above May and above estimates.

Chicago PMI came in sharply below estimates and last month. However, the prices paid index (a measure of inflation pressures) rose sharply to 89% from 76.9%.

grim

6/30/2006 09:15:00 AM  
Anonymous Anonymous said...

The baby boomers blame us for the housing slow down.

We ridicule the 20 somethings about their spending habits.

What do the 20 somethings think of us and baby boomers?

6/30/2006 09:16:00 AM  
Anonymous Anonymous said...

do you think the feds will meet again before Aug to raise interest rates?

6/30/2006 09:17:00 AM  
Blogger grim said...

Unlikely, the next FOMC meeting is August 8th, only 40 some days away.

grim

6/30/2006 09:29:00 AM  
Anonymous Anonymous said...

Well..I double down on my 50 cent bid yesterday.

"Seven out of the ten industry sectors First Call tracks are on course for double-digit earnings gains." N. Schwartz

"the Fed picture hasn’t really changed" Martin Wolk


Pat

6/30/2006 09:33:00 AM  
Blogger patient homebuyer said...

is anyone going to open houses this weekend?? i am not let these people with their overpriced properties sit through this hot weekend with no offers and little or no interest maybe they will get the message. i was on mlsli and there are a tremendous amount of properties for sale. it is a simple law of supply and demand

6/30/2006 09:36:00 AM  
Anonymous Anonymous said...

I didn't see a lot of open houses advertised this morning.

Maybe July 4th weekend is traditionally a day to go to the beach (95*F) and shop for ribs.

Pat

6/30/2006 09:40:00 AM  
Blogger X-Underwriter said...

I was just playing around with my mortgage payment calculator and saw some sobering numbers. Mortgage rates have just hit 7.00 for a 30 year fixed. Several years ago, they were 5.00%. What’s the difference?
Its amazing;
At a payment of $2,000/mo at 5% you can get a mortgage for $492,897
At 7.00%, you can only get $366,853, which is a $126,000 difference.
To get $492,000 at 7%, the payment would be $2,833. $800/mo difference!!!!!!
Prices gotta come down. The current market pricing
reflects the old interest rates. The same $600,000 house will now cost you $800 more/month than it did in 2004 when the rates were at 5%

6/30/2006 09:40:00 AM  
Anonymous Anonymous said...

They are coming down.

I do a lot of cutting and pasting of sales every week, and my spreadsheet is huge.

But I have to trend forward 6 months to eliminate the recording lag (using the exact straight line you've expressed.) Then I confirm today's expected sales price with people I meet on the street (all over, actually).

My graph is right on and has been for four months. Lower end prices are not right on, however, which concerns me, that more lower end people are going to be out more money down the road.

Pat

6/30/2006 09:47:00 AM  
Anonymous Anonymous said...

Nothing in JC Heights (condos only) for less than $450,000.

One listing for $350,000 sold in a day of listing.

Realtors say that Jersey City is probably the hottest area in North Jersey along with Hoboken.

Condos are typically priced at $400,000 - $600,000 for one bedroom and sell within a week.

You also need to put down at least 20% and have over 700 FICO just to get approved for purchase by condo board.

6/30/2006 09:49:00 AM  
Blogger X-Underwriter said...

Anonymous said...
"You also need to put down at least 20% and have over 700 FICO just to get approved for purchase by condo board."

My experience is that co-op boards need to approve you but I've never seen that with a condo. Also, mortgage lenders do loans over 80% all day on condos. Why would the boards restrict this?
Is this true?

6/30/2006 09:57:00 AM  
Blogger NJGal said...

There is no such thing as condo boards having to approve you OR having to put 20% down for a condo. That's only with co-ops. The poster is misinformed - no one would have been able to buy in JC or Hoboken if that was the case.

6/30/2006 10:02:00 AM  
Blogger Rich52 said...

I was just playing around with my mortgage payment calculator and saw some sobering numbers. Mortgage rates have just hit 7.00 for a 30 year fixed. Several years ago, they were 5.00%. What’s the difference?
Its amazing;
At a payment of $2,000/mo at 5% you can get a mortgage for $492,897
At 7.00%, you can only get $366,853, which is a $126,000 difference.
To get $492,000 at 7%, the payment would be $2,833. $800/mo difference!!!!!!
Prices gotta come down. The current market pricing
reflects the old interest rates. The same $600,000 house will now cost you $800 more/month than it did in 2004 when the rates were at 5%



The funny thing is, that $600,000 house in 2004 is probably now priced at $800,000 with the higher interest rate.

6/30/2006 10:04:00 AM  
Blogger wfmukerm said...

does the savings rate take into account 401K, etc. contributions? For years my savings account savings have been alarming, but I have always contriubted to 401Ks, etc.?

6/30/2006 10:06:00 AM  
Anonymous Anonymous said...

{{{There is no such thing as condo boards having to approve you OR having to put 20% down for a condo. That's only with co-ops. The poster is misinformed - no one would have been able to buy in JC or Hoboken if that was the case}}

Then you have never tried to buy a condo (not co-op) anywhere in the 5 boros or most of NJ.

The condo boards have as much, if not more power than a co-op board.

How are all these 20 somethings affording all these new condos going up downtown???

6/30/2006 10:14:00 AM  
Blogger skep-tic said...

Westchester median house prices tumbling:

Q1 05 $615k
Q2 05 $700k
Q3 05 $712k
Q4 05 $675k
Q1 06 $650k

www.wcbr.net

2d quarter numbers are going to look bad.

Inventory going up. Interest rates going up.

Every single indicator shows house prices going down.

Realtors need to change their tune if they are going to close deals. Sellers are in fantasy land.

6/30/2006 10:18:00 AM  
Blogger X-Underwriter said...

This comment has been removed by a blog administrator.

6/30/2006 10:29:00 AM  
Blogger X-Underwriter said...

Anonymous said...
How are all these 20 somethings affording all these new condos going up downtown???

Good question. Don't forget... these days, two out of every three undergraduate students (65 percent) go into debt an average of $19,202 to pay for college

http://biz.yahoo.com/brn/060626/19143.html

6/30/2006 10:33:00 AM  
Blogger NJGal said...

I actually almost bought a condo in hoboken and looked at several and there was not one mention of condo board approval at ANY of the places I looked at or on any realtor sites I followed.

6/30/2006 10:36:00 AM  
Anonymous Anonymous said...

codo boards do not , repeat,
do not approve your purchase.

Moron. you the same person
that pays the ticket price in
lord & taylor

6/30/2006 10:54:00 AM  
Blogger minutesfromNYC said...

I live in the NYC Metro Area, and I do not know anyone who is under 30 making between 100k and 200k a year. I guess the people I know aren't "most people"

6/30/2006 12:19:00 PM  
Blogger chicagofinance said...

This comment has been removed by a blog administrator.

6/30/2006 12:44:00 PM  
Blogger chicagofinance said...

The only people under 30 making over $100K are JDs, MBAs, or MDs. All of whom are in school debt up to their eyeballs, unless they came from wealhy families. There are some junior bankers or hedge fund dudes in this class. However, they have no friggin' lives, so who cares if they are pulling down such coin.

6/30/2006 12:45:00 PM  
Blogger NJGal said...

"The only people under 30 making over $100K are JDs, MBAs, or MDs. All of whom are in school debt up to their eyeballs, unless they came from wealhy families. There are some junior bankers or hedge fund dudes in this class. However, they have no friggin' lives, so who cares if they are pulling down such coin."

Ah, so true. I'm a JD, as is my better half, and most of our pals do indeed make such coin. But, as you say, most have debt and many also have young families - it's not as easy even on those salaries to save and buy something. We have one friend who bought his first apt. at age 38 - that's after years working at a big firm and saving. School debt, while not "irresponsible" in the same way as cc debt, is still a big chunk of change - ours amounts to a year's worth of property taxes in NJ or NY AND that's with very low interest rates. I can't imagine what will happen to people who got out of school before 2000 or after 2005.

I had a roomie in law school who's boyfriend at the time worked for an investment bank - he made money, sure, but after doing the math, based on the hours he worked, he realized that he could be a McDonald's manager, work the same hours and make the same money!

6/30/2006 01:06:00 PM  
Anonymous Anonymous said...

NJgal.. what a wake-up call I had one morning on the train to a "great job" where I averaged 12 hours a day and would never, ever be able to have a family.

I actually quick that week.

Same deal. I would have been better off working at a diner on the graveyard shift, with tips.

Pat

6/30/2006 01:29:00 PM  
Anonymous Anonymous said...

quick=quit

Pat

6/30/2006 01:30:00 PM  
Anonymous Anonymous said...

I am confused; in order to be upwardly mobile in Manhattan CNN/Money says that you have to be making 167K.

http://money.cnn.com/2006/03/14/pf/couple_cities_coli/index.htm

I was under the impression that everyone in Manhattan was rich and/or young and in it for the fun for a short period of time. Do people who make less just live in the outer boroughs? Are people in NYC fools? What is the deal (Seinfeld voice)?

6/30/2006 01:53:00 PM  
Blogger chicagofinance said...

Are you the $300 jeans person that just had an epiphany? ;)

6/30/2006 01:58:00 PM  
Blogger chicagofinance said...

The rich and young who are "living it up" in Manhattan, do not make a good living. They are independently wealthly either from inheritance, or a simple intergenerational stipend.

Don't be fooled.

6/30/2006 02:07:00 PM  
Anonymous Anonymous said...

Hmmmm.... don't think it's the $300 jeans whiner, epiphany not withstanding.

$300 jeans would never say, "What is the deal (Seinfeld voice.)?"



Pat

6/30/2006 02:07:00 PM  
Anonymous dreamtheaterr said...

njgal said "Ah, so true. I'm a JD, as is my better half, and most of our pals do indeed make such coin. But, as you say, most have debt and many also have young families - it's not as easy even on those salaries to save and buy something."

True. I am almost 30 and started a family a year back. The only reason I could was because I finished my MBA 2 years back with no student or credit card debt. Saving for a house down payment is harder with wife at home with the baby. But the peace of mind we get with quality family time is absolutely worth waiting and extra 2-3 years while saving for a down payment - which might be advantageous with the RE market softening.

I consider this six-figure salary misleading coz after taxes, folks are not left with much to survive. A penny saved is much more than penny earned.

6/30/2006 02:11:00 PM  
Anonymous Anonymous said...

yes dreamtheaterr..

And very difficult without the write-off, but at least you have a little one now, which is great incentive, isn't it?

Pat

6/30/2006 02:15:00 PM  
Blogger chicagofinance said...

529!

6/30/2006 02:24:00 PM  
Anonymous Anonymous said...

{{Do people who make less just live in the outer boroughs? Are people in NYC fools? What is the deal (Seinfeld voice)? }}}


No, they live outside the NYC metro area.

Less in NYC is anything 'less than 100K'. But everyone in NYC seems to be living it up. Everyone drives luxury cars & SUV's and wears nothing but designer clothes.

Single people who make between $80,000 - $100,000 a year are usually living in Queens either with parents or in a studio apartment near the Nassau Line or near the Belt Parkway.

People have no idea how much rents have surged in the past few years, and that landlords don't want to rent to someone unless they provide 2 years W2's showing 45 times monthly rent + 700+ FICO score.

Buying is out of the question unless you make over $150,000 a year and can find something for less than $500,000 which can't be found in the 'other 4 boros' let alone Manhattan.

6/30/2006 02:28:00 PM  
Blogger RichInNorthNJ said...

Ahhhh, you're the $300 jeans whiner!

6/30/2006 02:50:00 PM  
Anonymous Anonymous said...

you guys on here sterotype too much.

6/30/2006 03:09:00 PM  
Anonymous dreamtheaterr said...

chicagofinance said...
529!

6/30/2006 03:24:37 PM

The 529 with Vanguard started when wife was into her 4th month of expecting. As an immigrant, I want to give our daughter a chance to study at an Ivy League, something I could never afford.

6/30/2006 03:28:00 PM  
Blogger chicagofinance said...

This comment has been removed by a blog administrator.

6/30/2006 03:43:00 PM  
Blogger chicagofinance said...

dream:

NJ's direct plan is fine and is cheap if you work independently. For NJ residents, if you work with assistance, I would recommend VA's plan over NJ. The only reason is that NJ does not provide a tax break, so users may as well us the plan with superior funds and lower expenses.

Recognize NJ direct plan and advisor plan are different.

FYI - keep an eye on the 40 bps "Program Management Fee" a.k.a. Trenton Slush Fund.

6/30/2006 03:44:00 PM  

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