Due to the recent partial government shutdown, the BEA's Personal Income and Outlays report combines estimates for December 2018 and January 2019.

Personal income decreased 0.1 percent in January after increasing 1.0 percent in December, the largest increase since December 2012. Wages and salaries, the largest component of personal income, increased 0.3 percent in January after increasing 0.5 percent in December.

Personal Income and Outlays December 2018

Personal income increased $179.0 billion (1.0 percent) in December according to estimates released today by the Bureau of Economic Analysis. Disposable personal income increased $173.1 billion (1.1 percent), and personal consumption expenditures decreased $76.6 billion (-0.5 percent).

Real DPI increased 1.0 percent in December and real PCE decreased 0.6 percent. The PCE price index increased 0.1 percent. Excluding food and energy, the PCE price index increased 0.2 percent.

The increase in personal income in December primarily reflected increases in personal dividend income, compensation of employees, and farm proprietors’ income . Personal dividend income increased $83.4 billion, primarily reflecting a one-time special dividend payment by VMware Incorporated. Farm proprietors’ income increased $29.2 billion, which included subsidy payments associated with the Department of Agriculture’s Market Facilitation Program.

In December, real PCE decreased $77.9 billion which reflected a decrease of $67.2 billion in spending for goods and a $18.2 billion decrease in spending for services. Within goods, recreational goods and vehicles was the leading contributor to the decrease. Within services, the largest contributor to the decrease was spending for household electricity and gas.

Personal outlays decreased $71.3 billion in December. Personal saving rose to $1.21 trillion in December and the personal saving rate, personal saving as a percentage of disposable personal income, was 7.6 percent.

Personal Income January 2019

Personal income decreased $23.8 billion (-0.1 percent) in January. Disposable personal income (DPI) decreased $35.1 billion (-0.2 percent); Real DPI is unavailable for January.

The decrease in personal income in January primarily reflected decreases in personal dividend income, farm proprietors’ income, and personal interest income that were partially offset by increases in social security benefit payments (related to cost of living adjustments), and other government social benefits to persons, which includes the Child Tax Credit and the Affordable Care Act refundable tax credit.

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2018 Personal Income and Outlays

Personal income increased 4.5 percent in, compared with an increase of 4.4 percent in 2017. DPI increased 5.0 percent in 2018 compared with an increase of 4.4 percent in 2017. In 2018, PCE increased 4.7 percent, compared with an increase of 4.3 percent in 2017.

Real DPI increased 2.9 percent in 2018, compared with an increase of 2.6 percent in 2017. Real PCE increased 2.6 percent, compared with an increase of 2.5 percent in 2017.

Short Synopsis

  • Real income rose 1.0% in December and fell 0.1% in January.
  • Real wages rose 0.5% in December and 0.3% in January.
  • Real Spending declined 0.6% in December. Spending data for January is not available.

Income is up, but spending down.

Key Question: Is December an outlier on spending or did something significant just start?

I vote for the latter.

A reader just pinged me with this comment made by David Rosenberg:

"For those that still think December’s retail sales data are too weak to be believed, we just received SpendTrend’s retail sales figures (dollar volume growth) for February and the picture is not exactly pretty. In fact, the current YoY trend (+0.89%) is the worst it has been since early-2016 and is miles away from where it was at the peak of the tax cut stimulus(+5.99%) in May of last year."

Mike "Mish" Shedlock

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