WASHINGTON — The U.S. February personal income report was far weaker than on its face and confirms that the first quarter will struggle to post positive real growth.

February personal income was up 0.5%, personal consumption posted a 0.1% increase, and personal consumption expenditure core prices rose 0.1% in the month for a 2.0% increase over the year. Core prices last posted a 0.1% gain in June 2007.

However, real PCE was flat, and the January-February average stands less than plus-1% seasonally adjusted annual rate above the fourth-quarter average, suggesting very slow consumption and the danger of gross domestic product not growing much, if at all. 

Private wages and salaries grew $14.8 billion after printing up $21.9 billion in January; the month included $15 billion in bonuses, so core wages actually accelerated. The savings rate was up 0.3%, its best since October 2007, further suggesting consumer caution because savings were eked out on these modest wage gains.

Proprietors’ income and rents fell in February. Receipts on assets rose, and transfers jumped $38.2 billion due to a surge in Medicare prescription drug payments. Contributions for social insurance rose at a lesser rate as January’s unemployment insurance costs were lowered.

The main factors behind slower consumption were a 0.1% decrease in nondurables, which likely reflects energy prices, and flat services spending, possibly true cut-backs. Durables were up just 0.2%, and by most reports auto and other big-ticket sales continue to struggle.

Overall, the February report is very weak, and it’s unclear if there is a turnaround in the future as the labor market contraction will tend to lower total salaries.

— Market News International

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