Cleaning & Restoration Breaking News

U.S. personal income surges 3.7 percent on Microsoft dividend

WASHINGTON (AFP) - U.S. personal incomes soared a record 3.7 percent in December, largely as the result of a one-time $30 billion dividend payment from Microsoft.

Excluding the dividend, incomes rose 0.6 percent, the Commerce Department said Monday.

Consumer spending increased 0.8 percent in December.

The report on income was better than the 3.3 percent forecast by Wall Street economists, while the spending figure was a shade below the 0.9 percent average forecast.

Spending on durable goods jumped 4.3 percent. Spending on nondurable goods increased 0.6 percent and spending on services increased 0.4 percent.

A measure of inflation, the personal consumption expenditure price index, dropped 0.1 percent, while the core PCE index, which excludes food and energy prices, was flat.

With prices falling, real consumer spending rose 0.9 percent in the month, the fastest increase in spending since July. Because most shareholders won't pay taxes on their dividend until some time in 2005, after-tax or disposable incomes increased even faster than incomes, at a record four percent.

"The consumer ended the year spending like crazy and with the help of Microsoft, they had the money to spend," said Joel Naroff of Naroff Economic Advisors.

"This was a solid report. But since we new that would be the case it really shouldn't move markets or Fed thinking. The large infusion of income, even if was temporary, should lead to some improved spending early this year." Real disposable incomes (adjusted for price changes) increased a record 4.2 percent. The personal savings rate rose from 0.3 percent in November to 3.4 percent in December. But analysts pointed out that the savings rate was skewed by the Microsoft payment.

"Absent this dividend, the savings rate would have been close to zero -- as it has been for the last three months," said Drew Matus, an economist with Lehman Brothers.

Wages and salaries increased 0.4 percent in December, double November's growth. Wages have grown 5.2 percent in the past year. Proprietors' income increased 1.5 percent in December, while income from dividends increased 69.8 percent.

November's income gain was revised higher to 0.4 percent from an earlier reading of 0.3 percent. November spending was revised higher to 0.4 percent increase from 0.2 percent.

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