Personal Income: Modest Income and Spending Gains

February 26, 2016
Bottom Line: Both personal and disposable income rose modestly in January. Real consumer spending rose 2.0% from Q3 to Q4 -- this quarter (with only January available so far) looks to be growing at 2.4% annualized, indicating consumers increased spending in the beginning of the quarter. Finally, consumer inflation rose modestly year-over-year and had been on a slowing trend until October 2015. Core PCE rose by 0.3% mom, highest monthly increase since January 2012 and is now up 1.7% yoy. Personal Income ROSE by 0.5% in January, compared with market expectations for an increase of 0.4%, its largest increase since May. Personal Income is now 4.3% ABOVE its year ago level. Wages and Salaries ROSE by 0.6%. Both private and government wages and salaries increased moderately. Wages are now 4.5% ABOVE year ago levels. Personal Tax Payments ROSE by 0.8% and are now 5.9% ABOVE their year ago level, reflecting the year-on-year rebounds in employment and income. Disposable Income ROSE by 0.5% and is now 4.0% ABOVE its year ago level. Consumer Spending ROSE by 0.5%, compared with market expectations of an increase of 0.3%. The prior month was revised higher from unchanged to 0.1%. There were modest increases in durable goods and services spending. Spending is now 4.2% ABOVE its year ago level. The Saving Rate was UNCHANGED at 5.2%. The PCE Price Index ROSE by 0.1% and is now 1.3% ABOVE its year ago level. Meanwhile, the Core PCE Index ROSE by 0.3% 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 0.4% and is now 2.9% ABOVE its year ago level. The January level is 2.4% annualized above its Q4 level.
Article by contingentmacro