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Economy in Brief

U.S. Personal Income & Spending Surge With Stimulus Payments in January
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
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