US Personal Income and Spending: Good on the surface, weak overall - Wells Fargo

According to analysts from Wells Fargo, despite the good headline, taking into account inflation, the report shows a weak start of the year in personal income and spending.

Key Quotes: 

“Although disposable personal income increased 0.3 percent during the month, the same rate it did in December, real disposable personal income dropped 0.2 percent in January versus an increase of 0.1 percent in December.”

“Personal spending increased only 0.2 percent in January versus a very strong, 0.5 percent, increase in December. However, real personal consumption expenditures (PCE) were down 0.3 percent during the month. This weakness in spending may be a consequence of warm weather during January.”

“Thus, we may see a rebound in the coming months. However, it is not a minor issue for PCE, as it was the weakest performance since January of 2014. That said, we have become used to seeing weak PCE growth during the first quarter of the year since the recovery from the Great Recession. However, this time around it was due to a relatively “new” post Great Recession phenomenon: stronger inflation.”

“Although the first month of the year was disappointing for PCE, we are still encouraged by the strong increase in consumer confidence and the potential effects of this measure on consumer expenditures going forward.”