February Personal Income and Expenditures

Personal income rose by $47.7 billion in the month of February according to the Bureau of Economic Analysis. This 0.3 percent uptick was identical to January’s percentage uptick and the second consecutive monthly gain after a slight setback in December. Also, Americans spent more during the period as the growth rate of expenditures accelerated. Inflation data included in the indicator continued to be mild.

Wages and salaries are the largest component of personal income in America. The rate of increase slowed slightly in this category. After increasing by $17.2 billion in January, this component managed to grow by 0.2 percent or $13.0 billion in February. Payrolls expanded by $5.2 billion in the goods producing industries after contracting in the prior period. Income growth within the service industry slowed substantially from $17.3 billion to start the year to just $7.8 billion in February.

Americans spent 0.3 percent more money during the month than in January. Consumption of wares expected to last at least three years continued to decline but fell at slower pace. This is the third consecutive monthly downtick for durable goods. Nondurable expenditures managed to make back some of January’s sharp slowdown, increasing by 0.3 percent after the 0.9 percent fall. Spending on services continued to grow, albeit at a slower pace.

One of the most popular parts of this indicator is its inflation gauge. The central bank pays particular attention to the core personal consumption expenditure (PCE) price index which excludes food and energy costs. Despite their attempts to increase the rate of inflation within this subset, the year-over-year change has been between 1.1 percent and 1.2 percent in every month since April 2013. The Federal Reserve is looking for sustained price increases over 2.0 percent. The last time this measure of inflation was greater than 2.0 percent on a year-over-year basis was September 2008. That was the period when some of the nation’s largest financial firms failed or were forced to take some other form of action by regulatory authorities. Since that time, this inflation gauge and the world have not been the same. (by C. Cox)