Consumer Products

Income & Spending May Drag Q1 GDP

The Commerce Department has some slightly concerning data on income and spending as it pertains to growth and GDP as 2011 gets off to a start.  Personal income rose by 1.0% and spending was up by +0.2% in January. Dow Jones had estimates of +0.4% on income and +0.4% on spending as well.

The PCE price index was up 1.2% in January, and that was up 0.3% against the prior month.  For whatever this is worth, the inflation adjusted spending component would have been negative had it not been for a higher PCE.

Due to the fact that this is January data and before the real unrest came in North Africa and the Middle East caused an oil jump, much of the data may be retrospective rather than truly offering insight ahead.  The standout here when using that PCE deflator is that this could be setting up for yet another weak read on spending.  With 70% of GDP reliant upon spending, that poses a problem for the first quarter of 2011 as of now.

With income rising for the 91 of 100 employed in America, at least they are better off.

JON C. OGG