WASHINGTON — The February personal income report was weak but it is still possible that consumer spending is recovering more than one would think by looking at recent massive payroll losses.

Personal income printed down 0.2% in February, personal consumption expenditures increased 0.2%, and core PCE prices climbed 0.2%. Spending and savings are both a little better than expected.

Private wages declined $29.9 billion after falling $27.1 billion in January. The Commerce Department has lowered wage estimates by $20 billion each in January and February and will cut another $20 billion in March due to smaller bonuses.

Proprietor income, rents, and income receipts all fell as well, also illustrating a weak economy.

Even so, chained PCE advanced 0.7% in January and retreated a mere 0.2% in February, putting the first-quarter average more than 1% SAAR above the fourth-quarter average level. This suggests consumption is rising in the new measurement period — a result of rising government wages (up $3.9 billion in February) and transfer payments ($16.2 billion higher in February after a $56.7 billion increase in January when there was a COLA).

Personal savings was more than $450 billion, for a rate of 4.2% in February after 4.4% in January, the biggest rates since last spring. The last time the savings rate was above 4% for two months in a row was August-September 1998.

The bottom line from the consumption data is that spending is holding up slightly better than jobs, though we have a long way to go to recovery.

— Market News International

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