Personal Income Declines in January, Spending Very Weak in December and January

Please consider the BEA’s Personal Income and Outlays Report for January and February (partial).

Due to the recent partial government shutdown, this report combines estimates for January and February 2019. January estimates include both personal income and outlays measures, while February estimates are limited to personal income. Estimates of outlays for February will be available with the next release on April 29, 2019.

Highlights

• Real Income was up 1.0% in December but consumer spending fell 0.6%.
• Real income in January fell 0.2%.
• Economists at Econoday expected 0.3% spending growth in January but consumers only mustered 0.1% growth,
• There are no spending results or real numbers for February due to a lingering impact of the government shutdown.

Please recall that income in December was distorted by one-time factors as discussed on March 1 in Personal Income and Outlays for December.

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.

First-Quarter Trouble

Econoday commented: “Nearly all the readings in today’s set of data miss the consensus with January consumer spending pointing to opening trouble for first-quarter GDP and the weakness in core prices raising the risk that the Federal Reserve may soon be defending the downside of its 2 percent inflation target. On both scores, the balance for neutral monetary policy tilts, however slightly, toward the rate-cut side.”

Mike “Mish” Shedlock