It is significant when a single company, by declaring a dividend, can distort national income accounting...
CONSUMER SPENDING PUMPED UP BY MICROSOFT DIVIDEND
The government said U.S. consumer spending jumped in December after thousands of Americans shared in a massive payout by software giant Microsoft Corp. (MSFT)
"Microsoft's $32 billion special dividend paid out on Dec. 2 will distort a variety of indicators," Ethan Harris, chief economist at Lehman Bros., said in a research report.
Even stripping out the Microsoft factor, personal income was up a solid 0.6 percent, the Commerce Department said.
Consumer spending climbed 0.8 percent in December and was up 0.9 percent when factoring in a small drop in prices. Wages advanced 0.4 percent in December.
The personal consumption expenditures index, a favorite inflation measure of the Fed, slipped 0.1 percent and was unchanged when food and energy prices were stripped out.
Economists said the report suggested consumer spending would continue to support economic expansion.
"Consumers had some fire going into 2005, and that should keep the economy going," said Mark Zandi, chief economist at Economy.com in West Chester, Pennsylvania.
The department estimated that about 75 percent of the Microsoft dividend counted as personal income and said the payout boosted income by $24.8 billion.
"The large infusion of income, even if it was temporary, should lead to some improved spending early this year. That's good news for equities," said Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania.
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