WASHINGTON — Personal income rose 0.4% in January, while nominal PCE was up 0.2% and the core PCE price index rose 0.3% in the month and 1.5% year/year, all roughly as expected, data released by the Bureau of Economic Analysis Thursday morning showed.
The core price index's 1.5% year/year rise in January was the fourth in a row, still significantly below the levels in early 2017 and the Fed's 2.0% target.
Analysts had expected personal income to rise only 0.3% in the month, but a 0.5% jump in wages and salaries and solid gains in transfer payments and rental income caused the stronger-than-expected gain. Minimum wage increases in some states and the annual cost of living increase for Social Security provided much of that support.
Nominal PCE and the core price index both came in as expected.
The saving rate rose to 3.2% in January from 2.5% in December, the highest rate since August, but well below the levels seen early-last year. Some analysts have suggested that the plunge in the savings rate over the last year, from a 2017 high of 4.1% in February, has supported consumption. Consumers, confident about the economy and job prospects, have shifted their priorities from saving to spending.
Disposable personal income jumped 0.9% in the month, the strongest gain since January 2017. Personal taxes fell by 3.3% in the month on the introduction of the new tax law, so the rising level of personal income was able to boost disposable personal income. Real disposable income was up 0.6%.
The 0.2% gain in current dollar PCE followed stronger gains in the previous four months. Spending on durable goods fell 1.5% in the month, but nondurable goods spending rose 1.0% on a 3.0% rebound in energy prices. Services spending was up 0.3%.
Real PCE fell 0.1% in January, the first decline since January 2017, as the overall PCE price index rose 0.4% due to the energy price surge. The overall price index was up 1.7% year/year, the same as the previous two months.
After inflation adjustment, durable goods PCE was still down 1.6% but nondurable goods PCE was flat, compared with the 1.0% nominal gain. Real services PCE was up 0.1%.
The January real PCE level was up only 0.7% at an annual rate from the fourth quarter average. PCE was up 3.8% in the fourth quarter GDP report.
