Personal Income and Spending Up 0.4 Percent in January; Manufacturing Wages and Salaries Up 4 Percent Over the Past 12 Months

The Bureau of Economic Analysis said that personal income increased by 0.4 percent for the second straight month in January, exceeding the consensus estimate of 0.3 percent growth. Over the past 12 months, personal incomes have risen 3.8 percent in January, down from 4.3 percent in December. Even with that easing, income growth remains quite healthy. For manufacturers, total wages and salaries rose from $840.9 billion in December to $847.8 billion in January. That translated into a 4.0 percent increase in manufacturing wages and salaries year-over-year, up from $815.5 billion in January 2017.

At the same time, personal spending eased from a very robust 0.7 percent increase in December to 0.4 percent growth in January. Despite the slower figure, the data continue to be consistent with strong gains in personal consumption. Over the past 12 months, personal spending has risen by 4.4 percent, off slightly from the 4.5 percent pace observed in the prior report. In January, nondurable goods spending rose 1.0 percent, but purchases of durable goods fell by 1.5 percent. On a year-over-year basis, goods spending for durable and nondurable goods were increased at very healthy rates, up 4.6 percent and 4.3 percent, respectively, since January 2017.

The savings rate rose from 2.5 percent in December, its lowest rate since September 2005, to 3.2 percent in January. Despite the uptick in the savings rate, it has largely trended lower since peaking at 4.1 percent in February 2017.

In other news, the personal consumption expenditure (PCE) deflator increased by 0.4 percent in January, its strongest monthly gain since September. Total prices for consumers largely accelerated on a jump in energy goods and services costs, up 3.0 percent in January. Yet, core inflation—which excludes food and energy—was also higher, up 0.3 percent in January.

Despite the large gains in prices in January, overall inflation remains quite modes and largely under control, at least for now. After seeing pricing pressures accelerate strongly earlier in 2017—with the PCE deflator peaking at 2.2 percent year-over-year in February—inflation has pulled back since then. Since December 2016, the PCE deflator has risen by 1.7 percent, unchanged from the previous report. In addition, core PCE inflation was up 1.5 percent year-over-year in January for the third straight month, well below the Fed’s goal of 2 percent.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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