Personal Income and Spending Act as Offsets

Friday’s economic reports showed that personal income rose by 0.5%, or by $79.6 billion, in the month of January. The reading on disposable personal income also rose by 0.5%, or by $63.5 billion. January’s report from the Bureau of Economic Analysis showed that personal consumption expenditures (PCE) or consumer spending, also rose by 0.5% ($63.0 billion).

Bloomberg called for personal income to have risen by 0.4% in January. Spending was expected to have risen by 0.3%.

December’s personal income increased by 0.3% ($45.6 billion) and spending increased by 0.1% ($11.6 billion), based on revised figures.

When you keep seeing gains in personal income and spending, you have to wonder why so many other economic readings look mixed or weak. It may be tied to the savings rate, which is running at 5.2%.
[nativounit]
Spending was led by a 1.2% gain in durable goods spending, with a 0.6% gain in services. Autos still seem to be leading the durable goods spending.

With the PCE price index rising 0.3% on the monthly reading, the annual reading of 1.7% is getting ever closer to the Federal Reserve’s 2.0% to 2.5% inflation target.

This is one of the reports that is not screaming for the Fed to hike interest rates, but it is keeping a solid enough footing under the Fed’s belief that it can keep jawboning about raising rates.