Personal Income Jan 2009

Adam G. York, Economist

[email protected] ● 704-715-9660 March 02, 2009

Personal Income & Spending Surprised to the Upside Spending rose for the first time in seven months, perhaps a tentative sign that the pace of decline in consumption may be slower in the first quarter. While this up-tick does not likely signal the start of a string of increases, we will take any good news on the economy these days. Income also rose for the first time in three months. Spending Showed Glimmer of Hope

Income Also Moved Higher

• Spending increased for the first time since summer as consumers who had fled stores over the holiday season eased back into the marketplace. Still, we are a long way from signaling an all-clear for retailers. • Personal saving rose to its highest since 1995 as consumers continue to remain cautious in the face of economic weakness.

• Income ticked higher, but was driven solely by increases in government benefits, up $66.6 billion on the month. Declines were seen across the other major compensation categories. • Core inflation rose for the first time in months, which may reduce some of the threat of disinflation over the first half of the year. Still, deflation remains a bigger concern than inflation.

Personal Consumption Expenditures Month-over-Month Percent Change

3.5% 3.0%

Personal Income 3.5%

PCE: Jan @ 0.6%

2.5%

2.0%

2.0%

1.5%

1.5%

1.0%

1.0%

0.5%

0.5%

0.0%

0.0%

-0.5%

-0.5%

-1.0%

-1.0%

-1.5%

-1.5% 2002

2004

2006

10%

10%

5%

5%

0%

0%

-5%

-5% Personal Income 3-M Annual Rate: Jan @ -1.7% Personal Income Year-over-Year Percent Change: Jan @ 1.9%

-10% 92

2008

94

Personal Saving Rate 14%

Disposable Personal Inc. Less Spending as a % of Disposable Income

14% 12%

10%

10%

8%

8%

6%

6%

4%

4%

2%

2%

0%

0% Personal Saving Rate: Jan @ 5.0% Personal Saving Rate 12-M Mov Avg: Jan @ 2.2%

-4%

98

00

02

04

06

-10% 08

Year-over-Year Percent Change

5%

5%

4%

4%

3%

3%

2%

2%

1%

1%

-2% -4%

60 63 66 69 72 75 78 81 84 87 90 93 96 99 02 05 08

96

PCE Deflator vs. "Core" PCE Deflator

12%

-2%

15%

3.0%

2.5%

2000

Both Series are 3-M Moving Averages

15%

PCE Deflator: Jan @ 0.7% "Core" PCE Deflator: Jan @ 1.6% 0%

0% 92

94

96

98

00

02

04

06

08

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