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US Personal Income, Savings Rise, Spending Falls

Posted by Joseph Trevisani on Mar 2, 2015 10:29:00 AM

No doubt the American consumer is pleased to be paying less for gasoline but that shift in disposable income is not translating into exhuberance at the mall.

Personal income rose 0.3 percent in January, unchanged from December and slightly under the 0.4 percent  consensus estimate. It was the fourth miss on forecasts in the last six months.

Consumer spending dropped 0.2 percent on the month, twice the -0.1 percent prediction according to the Commerce Department in Washington, D.C. today. It had been forecast to slip 0.1 percent.

However when this nominal result is adjusted for inflation, spending rose 0.3 percent--the main difference being the sharp decline in energy costs. 

Demand for durable goods designed to last more than three years, such as automobiles, furniture and appliances rose 0.2 percent in January. Purchases of non-durable goods, which includes gasoline and energy products also climbed 0.2 percent. Consumption of services increased 0.4 percent, the most since September. The inflation corrected fighures are used by the government to calculate gross domestic product(GDP).

The U.S. saving rate surged to 5.5 percent annualized in January, the highest since December 2012. 

Auto sales have held up despite a softening economy. The major U.S. manufacturers have reported their best January sales figures in at least seven years.

The nationwide average price for a gallon of regular gasoline dropped to $2.03 a gallon on January  25, the least expensive since 2009, according to American Automobile Associaton.

The eight month collaspe in crude oil price and energy costs has pushed the personal consumption expenditure (PCE) price index down by 0.5 percent in Janaury from the prior month. It was up 0.2 percent from a year earlier, the least since October 2009. This measure has not been above the Fed's  2 percent inflation goal since March 2012.

The core PCE price index, which eliminates food and fuel and is the Federal Reserve’s preferred gauge of consumer inflation, rose 0.1 percent from the prior month and was up 1.3 percent from January 2014.

Construction spending dropped 1.1 percent in Janaury reported the U.S. Census Bureau, a large miss for this volatile series on the 0.3 percent forecast. Spending had gained 0.8 percent in December.  Construction outlays have declined in four of the past six months. 

The Institute for Supply Management reported that its February purchasing managers' index fell to 52.9, its fourth drop in a row and the lowest for this closely watched guage of business sentiment in 13 months. Econmists had predicted a reading of 53.0. The score for the  employment index skidded to its weakest level since June 2013.  Reading above 50 indicate expansion, below contraction.

 

Joseph Trevisani

Chief Market Strategist

WorldWdieMarkets Online Trading

Chart FX Street:

pce core March 2

 

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