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Economy in Brief
Chicago Business Barometer Declines Sharply in February
The ISM-Chicago Purchasing Managers Business Barometer fell 4.3 points in February to 59.5...
Goods Trade Deficit Widened Slightly in January
The advance estimate of the U.S. trade deficit in goods widened slightly to $83.74 billion in January..
Japan's Industrial Sector Mounts a Comeback
Japan's IP surged in January gaining 4.3% compared to December...
Aircraft Orders Boost U.S. Durable Goods Orders in January
Manufacturers' orders for durable goods increased a much larger-than-expected 3.4% m/m (4.5% y/y) in January...
Kansas City Fed Manufacturing Index Increases Again in February
The Kansas City Fed reported that its manufacturing sector business activity index rose to 24 in February...
Viewpoints
Commentaries are the opinions of the author and do not reflect the views of Haver Analytics.
by Tom Moeller February 26, 2021
• Income boosted by government payments of $600 to individuals.
• Spending growth strengthens for goods & services.
• Pricing power remains improved.
Personal income jumped 10.0% (13.1% y/y) last month after increasing 0.6% during December and falling 1.2% in November, revised from -1.3%. It was the largest monthly increase since April 2020. A 9.5% gain had been expected in the Action Economics Forecast Survey. Transfer payments surged 52.0% (80.4% y/y) as the government attempted to boost consumer spending. Wages & salaries improved 0.7% (1.1% y/y) following two months of 0.5% increase. Proprietors' income declined 0.5% (-5.1% y/y) after two months of sharp decline. Rental income strengthened 1.1% (1.3% y/y) after falling for three straight months. Income from assets declined 3.0% (-4.1% y/y) as dividend income weakened 6.7% (-4.4% y/y). Adding to the total of government payments, unemployment insurance receipts rose 85.4% last month after rising 9.5% In December. Disposable personal income rose 11.4% (15.0% y/y) last month after improving 0.6% in December. Adjusted for price inflation, real disposable income rose 11.0% (13.3% y/y) after edging 0.2% higher.
Consumers spent much of what the government gave them last month. Personal consumption expenditures strengthened 2.4% (-0.4% y/y) last month following moderate declines in the prior two months. A 2.2% rise had been expected. Adjusted for price inflation, spending increased 2.0% (-1.9% y/y) in December. The rise in spending reflected an 8.3% surge (17.1% y/y) in outlays on durable goods, led by a 10.6% increase (15.8% y/y) in furniture & appliance outlays. Spending on recreational goods & vehicles also jumped 10.6% (26.3% y/y) after falling for two straight months. Motor vehicle sales rose 5.2% (11.7% y/y) which followed a 1.3% rise. Nondurable goods purchases rose 3.3% (6.1% y/y) after falling for three straight months. Clothing spending jumped 8.3% (4.4% y/y), after declining in each of the prior three months. Food & beverage sales rose 3.9% (9.6% y/y) after a 2.0% decline while spending on gasoline edged 0.8% higher (-10.5% y/y) after falling for three straight months. Real outlays on services rose 0.5% (-7.0% y/y) as restaurant & hotel spending jumped 5.7% (-20.4% y/y) after two months of sharp decline. Recreation services outlays rose 3.7% (-31.2% y/y) while transportation service outlays surged 2.5% (-23.6% y/y) after a 1.4% increase. Health care outlays were fairly steady (-5.6% y/y) and housing & utilities spending declined 0.5% (+1.6% y/y).
Last month's surge in income and spending raised the personal saving rate to 20.5% in January from 13.4% in December. The rate reached a record high 33.7% in April. The level of personal saving rose by more than two-thirds (210.4% y/y).
The PCE chain price index increased 0.3% (1.5% y/y) in January following a 0.4% rise. The price index excluding food and energy rose 0.3% (1.5% y/y) for a second month, after holding steady for two months. Energy prices jumped 3.5% (-4.5% y/y) after strengthening 2.7% in December. Food & beverage prices eased 0.1% (+3.6% y/y) after improving 0.2%.
The personal income and consumption figures are available in Haver's USECON database with detail in the USNA database. The Action Economics figures are in the AS1REPNA database.
Personal Income & Outlays (%) | Jan | Dec | Nov | Jan Y/Y | 2020 | 2019 | 2018 |
---|---|---|---|---|---|---|---|
Personal Income | 10.0 | 0.6 | -1.2 | 13.1 | 6.1 | 3.9 | 5.3 |
Wages & Salaries | 0.7 | 0.5 | 0.5 | 1.1 | 0.2 | 4.7 | 5.0 |
Disposable Personal Income | 11.4 | 0.6 | -1.4 | 15.0 | 7.0 | 3.7 | 5.8 |
Personal Consumption Expenditures | 2.4 | -0.4 | -0.6 | -0.4 | -2.7 | 3.9 | 4.9 |
Personal Saving Rate | 20.5 | 13.4 | 12.5 | 7.6 (Jan '20) | 16.3 | 7.5 | 7.8 |
PCE Chain Price Index | 0.3 | 0.4 | 0.0 | 1.5 | 1.2 | 1.5 | 2.1 |
Less Food & Energy | 0.3 | 0.3 | 0.0 | 1.5 | 1.4 | 1.7 | 2.0 |
Real Disposable Income | 11.0 | 0.2 | -1.4 | 13.3 | 5.8 | 2.2 | 3.6 |
Real Personal Consumption Expenditures | 2.0 | -0.8 | -0.6 | -1.9 | -3.9 | 2.4 | 2.7 |