Monday, March 2, 2009

Consumer Spending, Income Post Gains in January

I told you it was going to be an ugly "recovery", but that the government economic numbers would show gains. It's starting.

Personal income increased $44.8 billion, or 0.4 percent, and disposable personal income increased $183.0 billion, or 1.7 percent, in January, according to the Bureau of Economic Analysis

The BEA attributed the rise in income to pay rises for federal civilian and military employees, as well as cost-of-living adjustments to several government transfer payments programs. It said excluding these factors, incomes would have increased by only 0.2 percent in January.

Pay raises for government employees aren't exactly raising the productivity of the country, but the way the government collects data, it sure is going to look positive from a data release perspective. Wait until the "stimulus" slop starts to hit the data.

In the real world, proprietors' income decreased $6.9 billion in January, compared with a decrease of $7.0 billion in December. Farm proprietors' income increased $0.2billion, in contrast to a decrease of $0.5billion. Nonfarm proprietors' income decreased $7.1 billion, compared with a decrease of $6.4billion.

Rental income of persons decreased $0.4 billion in January, in contrast to an increase of $4.0percent in December. Personal income receipts on assets (personal interest income plus personal dividend income) decreased $6.7 billion, compared with a decrease of $29.0 billion.

Consumer spending rose in January for the first time in seven months, with a gain of 0.6%. The increase was across the board. Purchases of durable goods (what I consider capital goods), such as autos, furniture, and other long-lasting items, rose 0.2 percent. Purchases of non-durable goods climbed 0.7 percent, and spending on services, which account for almost 60 percent of all outlays, rose 0.3 percent.

I expect in the months ahead the durable goods sector will show stronger gains than non-durables as the money entering the system eventually will be loaned out for financing--which banks are still very cautious about.

In a misleading part of the report, it was stated that the savings rate climbed to 5 percent. The climb is not people putting money to work in savings accounts, and the like. This was panic money moving out of savings, such as time deposits and money markets, and being put into FDIC insured checking accounts, and currency. This was cash hoarding, not savings.

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