Government Programs Support Income. Heating Bills Support Spending.
- U.S. Personal Income increased by 0.3 percent in January, driven by special factors.
- After accounting for inflation and taxes, Real Disposable Personal Income also gained 0.3 percent.
- Real Personal Consumption Expenditures were up by 0.3 percent in January.
- January Construction Spending ticked up by 0.1 percent as private residential spending increased.
- The ISM Manufacturing Index for February increased to 53.2 as new orders improved.
U.S. personal income increased by 0.3 percent in January, driven by offsetting special factors originating from the federal government. Social benefits paid out (transfer receipts) increased by a strong 1.2 percent in January. Increased government benefits came from the Affordable Care Act and from cost-of-living increases. The expiration of long-term unemployment benefits was a drag, as was the after-effect of the December boost in lump-sum social security payments. The wage and salary component of personal income increased in January by a tame 0.2 percent, after declining by 0.1 percent in December. This reflected the weak job growth of those two months. Income from financial assets has recently been soft, essentially unchanged from last July. Real overall consumer spending gained 0.3 percent in January. Spending on both durable and nondurable goods declined in January, for the second month in a row. Consumer spending on services was strong in January as utility bills increased. Price indexes were tame for the month. The PCE price index gained 0.1 percent in January, as did the core PCE index (excluding food and energy).
Construction spending reportedly increased slightly in January, up by 0.1 percent. Public construction spending was down by 0.8 percent, consistent with the unwind of fiscal stimulus and the budget sequester. Private nonresidential spending was off 0.2 percent. Private residential was up, running counter to the weak housing starts numbers for the month. The ISM Manufacturing Index increased in February, up to a solid 53.2 percent. New orders firmed up, as did inventories and supplier deliveries. Anecdotal comments say that weather has been a negative factor this winter, but business optimism appears to be improving.
Market Reaction: U.S. equity markets are down, nervous about the Ukraine situation. The yield on the 10-year Treasury bond is down to 2.61 percent. NYMEX crude is up to $104.72/barrel. Natural gas futures are down to $4.57/mmbtu.
For a PDF version of this Comerica Economic Alert click here: Personal Income 030314.