Feb Personal Income was flat vs expectations of a gain of .1% but Jan was revised up by .2% of a pt to a gain of .3%. Because Spending rose .3%, in line with forecasts, the personal Savings Rate fell to 3.1% from 3.4% and to the lowest level since Oct ’08. While this can sustain short term economic growth, the long term health of the economy in a deleveraging world needs higher savings rates, especially with exploding public sector debt. The headline PCE price deflator was unchanged, therefore REAL income was flat with REAL spending was up .3%. The core PCE was also flat. Bottom line, the Fed will take comfort in the inflation statistics even though the energy component in particular will reverse higher in March but income growth running higher by 2% y/o/y with spending up 3.4% y/o/y can only last for so long with access to credit not what it used to be.

Category: MacroNotes, Uncategorized

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

3 Responses to “Income/Spending about in line with expectations”

  1. advocatusdiaboli says:

    a dramatic aspect: the personal consumption expenditures price index, excluding food and energy, rising 1.3 percent in the 12 months to February but increased increased 1.5 percent in January alone. That is a key inflation indicator the Fed watches I believe. I am with you BR, it is unsustainable without lending but I worry that is lending is added, the savings rate will go even lower and that’s not good news. Will spending stay up long enough to convince employers to start hiring again. Let’s hope so–I think employment is the crux.

  2. cognos says:

    Again, positive revision gets a passing mention (compared with those old posts on “all” the prior negative revisions — pretty revisionist).

    Looks good. Negative savings rate is what we need and where we’re headed back to.

    US entreprenurs “save” through capital gains. The wealthiest people I know… have a lifetime negative savings rate (according to stats like this). What I mean by that… is that they spent more than they ever made in “income” in order to build a business from scratch and then own the equity. Wow, then it turns out the equity was worth $10M, $100M, or even $1B. This same phenomenon can be found in the coffee shop owner, the real estate developer, and entrepreneurs everywhere. (Partially… its just a shifting to “capital income” to pay the lower tax rate.)

    That microcasm can be seen as the US economy “writ large”. We tend to be fixed income borrowers… even at the govt and corp levels from abroad. But we translate that money into far more valuable equity cash-flow streams in the ownership of business interests. See? Negative savings… but high wealth.

    My point — dont worry too much about the savings rate.

  3. [...] component in particular will reverse higher in March,” Miller Tabak’s Peter Boockvar says. “But income growth running higher by 2% y/o/y with spending up 3.4% y/o/y can only last for [...]