The reading for Personal Income and Consumer Spending is now out for the month of February.  Unfortunately, income looks light, while spending is surprising to the upside.  February saw only a +0.2% gain in personal income while spending posted a stronger gain to +0.8% for the month.  Bloomberg had the consensus estimates as +0.4% for personal income and +0.6% for personal spending.

Personal income in January was initially reported to have risen by 0.3% after a 0.5% gain the month before, but the January figure was revised down to +0.2%.  Consumer spending in January rose by 0.2% after having been unchanged in December.

What is interesting here is that the spending figures are again outpacing income.  Some could argue this means lower savings rates, while others may argue that it means higher prices as energy costs were up by 3.6% in February.

It is also worth noting that the price index for personal consumption rose by 2.3% if you use a year over year analysis and that is above the loose 2.0% target from the Fed.  It sounds like the Fed is going to have to decide whether or not that ‘inflation from oil and gas is temporary’ is still in the cards.   Bloomberg notes on this reading each month, “Personal income is the dollar value of income received from all sources by individuals. Personal outlays include consumer purchases of durable and nondurable goods, and services.”

JON C. OGG

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