Personal Income: Modest Income and Spending Gains

March 28, 2016
Bottom Line: Both personal and disposable income rose modestly in February. Real consumer spending rose by 2.4% from Q3 to Q4 -- this quarter (with only January and February available so far) looks to be growing at only 1.3% annualized, indicating consumers are spending cautiously in Q1. Finally, consumer inflation fell slightly but core PCE rose by 0.1% mom and is now up 1.7% yoy. Personal Income ROSE by 0.2% in February, compared with market expectations for an increase of 0.1%. Personal Income is now 4.0% ABOVE its year ago level. Wages and Salaries FELL by 0.1%. Private payrolls declined while government wages and salaries increased. Wages are still 4.3% ABOVE year ago levels. Personal Tax Payments were UNCHANGED and are now 5.7% ABOVE their year ago level, reflecting the year-on-year rebounds in employment and income. Disposable Income ROSE by 0.2% and is now 3.7% ABOVE its year ago level. Consumer Spending ROSE by 0.1%, compared with market expectations of an increase of 0.3%. The prior month was revised lower from 0.5% to 0.1%. There were small increases in durable goods and services spending while a modest decline in nondurable goods spending. Spending is now 3.8% ABOVE its year ago level. The Saving Rate ROSE by 0.1 points to 5.4%. The PCE Price Index FELL by 0.1% but is still 1.0% ABOVE its year ago level. Meanwhile, the Core PCE Index ROSE by 0.1% and is now 1.7% ABOVE its year ago level. Core consumer inflation had been on a slowing trend until October 2015 but is now rising modestly. Real Consumer Spending ROSE by 0.2% and is now 2.8% ABOVE its year ago level. The January/February average is 1.3% annualized above its Q4 level.
Article by contingentmacro