January Personal Income & Expenses

The Bureau of Economic Analysis (BEA) reported personal income rose in January by 0.3%, following a flat December reading. Wages and salaries by themselves gained 0.2%, helping reverse the 0.1% dip in December. Also for the month, the BEA said spending jumped 0.4%, with hikes mostly in the services category, while December was revised down to show a slight 0.1% increase.

Your brain trust here at Atlas is not all that willing to ascribe much value to this particular report since it contains several elements which may eventually be seen as one-hit wonders. For instance, incomes rose in part because several provisions within the Affordable Care Act (Obamacare) boosted the total by some $28 billion in the government’s social benefit payments. Cost-of-Living adjustments made by the government in January to transfers such as Social Security also caused the total to rise, as did pay raises for military personnel. At the same time the end of some long-term unemployment benefits pulled the total down. Adding to the confusion is the latest excuse for most things foul, namely the rotten weather which likely had an unquantifiable but adverse effect on wages. Still, while we wait for time to bring more clarity, the general tone of the January report does suggest an overall increase in income which offsets the drop we saw in December.

Prices as measured by the headline personal consumption expenditures (PCE) barely rose, up just 0.1%, while the core PCE, which excludes food and energy, was also up by that same amount. Year-over-year we see this measure of inflation up 1.2% at headline and 1.1% core.

Interestingly, the BEA also publishes a statistic called the “market-based PCE price index” which they define as “a measure of the prices paid by persons for domestic purchases of goods and services…based on market transactions for which there are corresponding price measures.” Golly, that sounds like something useful, actual unadjusted raw data. According to an analysis by MarketWatch, it rose just 0.8% annualized in the fourth quarter of last year, suggesting a rather modest rise in prices for those goods you and I regularly consume. Good news, indeed. Now, if only the BEA would tell my wallet! (by J R)