U.S. Personal Income Growth Outpaces Spending

As income growth remains firm, individuals are using the money to rebuild savings.

Personal income rose 0.4% (3.7% y/y) during February for the third consecutive month. The gain matched expectations in the Action Economics Forecast Survey. Wages & salaries rose 0.5% (4.5% y/y) following a 0.6% increase. It was the third such rise in four months. Proprietors' income jumped 1.1% (3.5% y/y) following a 0.3% improvement. Rental income rose 0.6% (5.2% y/y) after a 0.5% gain. Dividend income rebounded 0.9% (3.7% y/y) following three consecutive months of decline. Interest income eased 0.1% (+3.2% y/y) for the second consecutive month. Personal transfer receipts held steady (2.7% y/y) following a 1.3% surge. Social Security payments eased 0.2% (+4.7% y/y) after a 2.5% jump. Medicare payments gained 0.2% (2.7% y/y) after a 0.1% uptick and Medicaid benefits rose 0.3% (2.8% y/) after a 0.5% rise. Unemployment insurance benefits dropped 2.5% (-8.9% y/y) after increasing 1.4%.

Disposable income increased 0.4% (3.9% y/y) following a 1.0% surge. Adjusted for price changes, take-home pay improved 0.2% (2.1% y/y) after a 0.6% gain.

Personal consumption expenditures gained an expected 0.2% (4.6% y/y) during February following an unrevised 0.2% January rise. These were the smallest monthly increases since August. Adjusted for price inflation, personal spending remained unchanged (2.8% y/y) after a 0.2% decline. Real durable goods purchases rose 0.6% (7.1% y/y) after a 1.6% decline. Motor vehicle buying eased 0.2% (5.4% y/y) after a 3.5% decline. Real spending on home furnishings & appliances fell 0.4% (+7.5% y/y), down for the third straight month. Real spending on recreational goods & vehicles recovered 1.9% (7.4% y/y) following a 1.4% decline. Constant dollar spending on nondurable items fell 0.3% (+2.8% y/y), down for the third straight month. Real purchases of clothing & footwear retreated 1.2% (+3.8% y/y), off for the third straight month. Real spending on food & beverages eased 0.1% (+2.5% y/y), also down for the third consecutive month. Real spending on gasoline & oil dropped 1.1% (+0.4% y/y) after a 0.8% fall. Real spending on services held steady (2.1% y/y) after ticking 0.1% higher. Real recreation spending recovered 0.7% (0.9% y/y) after a 1.0% decline while housing & utilities expenditures dropped 0.7% (+1.3% y/y) after a 0.1% slip. Real outlays on health care improved 0.1% (2.5% y/y) for the second straight month while transportation services outlays declined 0.5% (+2.1% y/y) after a 0.4% gain.

The personal savings rate increased to 3.4%, the highest level in six months. That was up from December's roughly twelve-year low of 2.4%.

The PCE chain-type price index rose 0.2% (1.8% y/y) after a 0.4% increase. Excluding food & energy, prices improved 0.2% (1.6% y/y) following a 0.3% gain. Nondurable goods prices held steady (1.6% y/y) following a 1.0% rise fueled by strength in gasoline & energy prices. Durable goods prices declined 0.3% (-2.6% y/y) following a 0.1% increase. Services prices improved 0.3% (2.5% y/y) after three straight months of 0.2% increase.

The personal income & consumption figures are available in Haver's USECON database with detail in the USNA database. The Action Economics figure is in the AS1REPNA database.