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Economy in Brief

U.S. Personal Income & Spending Decline in February
by Tom Moeller  March 26, 2021

• Total income falls but wage income holds steady.

• Spending weakens across categories.

• Pricing power moderates.

Personal income weakened 7.1% (+4.3% y/y) during February following a little-revised 10.1% January jump. A 7.0% decline had been expected in the Action Economics Forecast Survey. Transfer payments declined 27.4% following the 52.2% January surge due to government stimulus checks. Wages & salaries held steady both m/m and y/y after rising firmly in each month since May. Proprietors' income jumped 2.3% (-4.8% y/y) after easing 0.1% in January. Rental income strengthened 1.3% (2.5% y/y) for a second consecutive month. Earnings on assets rose 0.5% (-3.1% y/y) as dividend income rose 0.7% (-4.0% y/y) and interest income improved 0.4% (-2.4% y/y). Disposable personal income declined 8.0% (+5.0% y/y) last month after improving 11.4% in January. Adjusted for price inflation, real disposable income fell 8.2% (+3.4% y/y) after strengthening 11.1% in January.

Snow and ice storms weighed on consumer spending last month. Personal consumption expenditures weakened 1.0% (-0.6% y/y) following a 3.4% January rise, revised from 2.4%. A 0.7% decline had been expected. Adjusted for price inflation, spending decreased 1.2% (-2.1% y/y) after rising 3.0%. The decline in spending reflected a 4.6% drop (+16.1% y/y) in outlays on durable goods, led by a 5.8% (+22.1% y/y) decline in spending on recreational goods & vehicles. Spending on furniture & appliances declined 5.1% (+13.3% y/y) while motor vehicle sales fell 4.2% (+14.1% y/y). Nondurable goods purchases declined 2.5% (+5.3% y/y). Clothing spending weakened 4.9% (+1.7% y/y). Food & beverage sales fell 1.7% (+10.0% y/y) after rising 5.9% while spending on gasoline edged 0.5% higher (-10.2% y/y). Real outlays on services eased 0.1% (-7.0% y/y) as restaurant & hotel spending fell 1.3% (+20.1% y/y) after a 6.9% January surge. Recreation services outlays rose 0.2% (-30.9% y/y) while transportation service outlays declined 1.4% (-25.5% y/y). Health care outlays eased 0.2% (-5.2% y/y) but housing & utilities spending improved 0.4% (1.5% y/y).

The personal savings rate fell to 13.6% in February from 19.8% in January. The rate reached a record high 33.7% in April. The level of personal saving rose by more than one-third in February (+73.5% y/y).

The PCE chain price index increased 0.2% (1.6% y/y) last month following a 0.3% January rise. The price index excluding food and energy edged 0.1% higher (1.4% y/y) after a 0.2% gain, revised from 0.3%. Energy prices jumped 3.8% (1.2% y/y), strong for the third straight month. Food & beverage prices rose 0.2% (3.3% y/y) after easing 0.1% in January.

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 (%) Feb Jan Dec Feb Y/Y 2020 2019 2018
Personal Income -7.1 10.1 0.5 4.3 6.1 3.9 5.3
  Wages & Salaries -0.0 0.7 0.5 -0.0 0.2 4.7 5.0
Disposable Personal Income -8.0 11.4 0.6 5.0 7.0 3.7 5.8
Personal Consumption Expenditures -1.0 3.4 -0.6 -0.6 -2.7 3.9 4.9
Personal Saving Rate 13.6 19.8 13.5 8.3 (Feb '20) 16.3 7.5 7.8
PCE Chain Price Index 0.2 0.3 0.4 1.6 1.2 1.5 2.1
  Less Food & Energy 0.1 0.2 0.3 1.4 1.4 1.7 2.0
Real Disposable Income -8.2 11.1 0.2 3.4 5.8 2.2 3.6
Real Personal Consumption Expenditures -1.2 3.0 -0.9 -2.1 -3.9 2.4 2.7
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