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Economy in Brief

U.S. Personal Spending Jumps but Income Stagnates in January
by Tom Moeller  February 25, 2022

• Strong goods purchases follow December's weakness.

• Core price inflation remains steady & strong.

• Wage & salary growth eases slightly.

Consumer spending was surprisingly strong last month. Personal consumption expenditures surged 2.1% (11.8% y/y) during January following a 0.8% December decline, revised from -0.6%. It was the strongest since March 2021. A 1.5% rise had been expected in the Action Economics Forecast Survey. Adjusted for price inflation, spending rose 1.5% last month (5.4% y/y) after falling 1.3% in December.

Real spending on durable goods advanced 8.5% in January (2.1% y/y) after December's 6.0% decline. The rise was led by a 12.9% jump (-1.5% y/y) in real outlays on motor vehicles & parts after two months of significant decline. Real purchases of recreational goods & vehicles jumped 7.6% last month (7.4% y/y) after falling 7.0% in December. Real furniture & appliance outlays rose 6.4% (-3.7% y/y) and recovered December's shortfall. Real nondurable goods buying improved 1.9% in January (4.6% y/y) after a 2.6% December decline. Adjusted for inflation, clothing outlays rose 4.5% in January (9.1% y/y) after a 6.8% decline in December. Real food & beverage expenditures reversed December's decline with a 1.2% increase (0.8% y/y) but spending on gasoline & other energy products weakened 2.9% (+11.1% y/y). Real outlays on services ticked 0.1% higher in January (6.4% y/y), the same as they did in both of the prior two months. A 0.6% increase (1.4% y/y) in spending on housing & utilities followed a 0.1% slip in December and offset a 0.9% decline (+21.0% y/y) in real outlays on recreation services. Real spending at hotels & restaurants weakened 1.5% last month (+20.0% y/y) after holding fairly steady in December.

Pricing power continues strong. The PCE chain price index rose 0.6% in January (6.1% y/y), about the same as it did in each of the prior three months. The price index excluding food and energy rose 0.5% also as it did in the prior three months. The 5.2% y/y increase was the largest since April 1983. Durable goods prices rose 1.0% (11.6% y/y) reflecting a 2.2% increase (11.0% y/y) in home furnishings & appliance prices which followed a 1.0% December gain. Prices for recreational goods & vehicles improved 0.9% (2.4% y/y) last month after falling 0.5% in December. Motor vehicle & parts prices rose 0.4% (24.0% y/y) following four monthly gains between 1.4% and 3.0%. The nondurables goods price index improved 0.7% (7.2% y/y) after rising 0.5% in December. Clothing & footwear prices jumped 1.0% (3.8% y/y), about as they did in each of the prior three months. Gasoline & oil costs eased 0.2% (+36.3% y/y) after a 1.2% strengthening. The services price index rose 0.4% last month (4.6% y/y) after a 0.5% December gain. The cost of housing & utilities rose 0.7% (4.9% y/y) after increasing 0.4% in each of the prior two months. Restaurant & hotel prices edged 0.1% higher (6.2% y/y) after two straight 0.6% increases.

Personal income held steady (-2.1% y/y) in January after rising 0.4% in December, revised from 0.3%. A 0.5% decline had been expected. Wages & salaries increased 0.5% last month (10.2% y/y) after rising 0.7% in January but transfer receipts declined 1.3% (-31.8% y/y) after holding steady in January. Rental income eased 0.3% (+5.9% y/y) after two straight 0.7% increases. Proprietors income rose 0.4% (12.4% y/y). Disposable income increased 0.1% (-4.4% y/y) in January, after rising 0.2% in December. Adjusted for price inflation, disposable income declined 0.5% (-9.9% y/y), off for the sixth straight month.

The personal savings rate declined to 6.4% in January from 8.2% in December. It remained down from a high of 33.8% in April of 2020. The level of personal savings declined 21.6% in January and has fallen by roughly two-thirds during the last twelve months.

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 2021 2020 2019
Personal Income 0.0 0.4 0.6 -2.1 7.4 6.5 4.1
  Wages & Salaries 0.5 0.7 0.7 10.2 9.3 1.3 4.8
Disposable Personal Income 0.1 0.2 0.5 -4.4 6.1 7.5 3.8
Personal Consumption Expenditures 2.1 -0.8 0.6 11.8 12.1 -2.6 3.7
Personal Saving Rate 6.4 8.2 7.2 19.9 (Jan. '21) 12.2 16.6 7.6
PCE Chain Price Index 0.6 0.5 0.6 6.1 3.9 1.2 1.5
  Less Food & Energy 0.5 0.5 0.5 5.2 3.3 1.4 1.7
Real Disposable Income -0.5 -0.3 -0.1 -9.9 2.2 6.2 2.3
Real Personal Consumption Expenditures 1.5 -1.3 -0.0 5.4 7.9 -3.8 2.2
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