February Personal Income Up 0.4%; Spending Rises 0.1%

WASHINGTON — Personal income rose 0.4% in February, personal consumption grew 0.1%, and core PCE prices increased 0.1% for a 1.4% gain over the year.

It is notable that spending was lower than expected even as income edged out most expectations.

Private wages advanced $23.9 billion after a surge of $47.3 billion in January. Proprietors' income fell at both the farm and nonfarm levels.

But rents, government transfers, and income receipts rose. Cost of Living Adjustments kicked transfers permanently higher as of January. Dividend payments surged $25.3 billion in February and this might have been unexpected.

With income above expectations and spending below, savings jumped almost $40 billion in the month to $768.6 billion at an annual rate. This put the saving rate at 5.8%, its highest since December 2012, when consumers were rebuilding household balance sheets after the recession.

Real PCE decreased 0.1%. This was led by a $16.2 billion pullback in durable goods spending.

The result is that Q1 real spending is weak — even though December and January spending was revised higher. Q1 real PCE is growing at about 1.6% SAAR, a slow pace that is less than half the growth Q4 rate.

Slower real spending portends slower GDP growth in Q1. The question remains whether this is merely a bad weather impact, and whether Q2 real GDP can rebound.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.
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