Personal income increased 0.3 percent in February, while personal consumption expenditures printed a similar rate. Personal spending was revised down to 0.2 percent from an increase of 0.4 percent in January.
Personal Income Came in as Expected in February
Personal income came in at 0.3 percent in February, the same print observed in January. Disposable personal income posted a similar rate of 0.3 percent for both months. Meanwhile, real disposable personal income also increased 0.3 percent after a print of 0.2 percent in January. However, the increase in personal income showed some weakness compared to January. Private wages and salaries were up $13 billion in February compared to an increase of $17.2 billion the previous month. The biggest improvement in February was a meager decrease of $0.3 billion for manufacturing payroll wages and salaries, compared to a drop of $2.8 billion in January, which was likely affected by weather. However, the biggest disappointment in service sector wages and salaries was an increase of only $7.8 billion in service producing industries compared to a $17.3 billion increase in January. This strong slowdown in private wages and salaries is consistent with the weakness seen in the ISM non-manufacturing index for February and is worrisome, especially if we see another weak number for ISM non-manufacturing in March. The other big difference for personal income in February was a $2.5 billion increase in personal income receipts on assets which, although small, was much better than the $13.1 billion decrease reported in January. Personal current transfer receipts also contributed to weakness in February, as it rose only $18.6 billion in February following a $29.9 billion increase in January. Recall that this $29.9 billion increase in personal current transfers in January was, in part, boosted by the Affordable Care Act, although this effect was clearly lower in February.
Personal Consumption Was Not as Strong as the Headline
Personal consumption expenditures were up 0.3 percent in February, but the January gain was revised from an original 0.4 percent print to only 0.2 percent. In real terms, personal consumption expenditures increased only 0.2 percent in February after doing so by 0.1 percent in January. This means that personal consumption is likely going to be weaker than initially estimated based on the downward revisions to January data. The result for personal consumption expenditures for both January and February is that consumers did not spend as much as estimated on energy to heat their home or, if they did, then they cut other spending during the first two months of the year. This is also probably another explanation of why the ISM non-manufacturing index came in so weak in February compared to the relatively strong readings of the previous months. The good news for the future is that the personal saving rate increased to 4.3 percent from a 4.2 percent print in January.
Wells Fargo