US personal incomes keep expanding, but spending lags

Personal incomes in the US grew slightly more quickly than expected last month, but gains in spending failed to meet analysts’ forecasts.

Consumer expenditures grew by 0.1% month-on-month, according to the Bureau of Economic Analysis.

That was one tenth of a percentage point less than anticipated by economists.

Americans' incomes on the other hand strengthened at a 0.4% month-on-month clip in February, as forecast.

January’s gain for incomes was revised higher to show a 0.4% rise as well, versus a preliminary estimate of growth of 0.3%.

In what may be welcome news for the US Federal Reserve, its favoured measure of inflation, the core price deflator for consumption expenditures advanced at 1.4% year-on-year pace, up from 1.3% in the month before (consensus: 1.3%).

Main booster to spending power likely peaked

Commenting on the data, economists at Barclays pointed out how upwards revisions to the fourth quarter data on consumption were to explain for the miss in today’s release. However, in their view the main support to household spending power “likely peaked” in the fourth quarter.

Economist Michael Galpen wrote that it “should fade in the months ahead, as monthly rates of headline inflation remain positive.”

In inflation-adjusted terms, personal consumption fell 0.1% month-on-month in February, Galpen further pointed out.

Personal savings rate higher

Personal savings - disposable personal income less personal outlays - was $768.6bn in February, compared with $728.7bn in January.

The personal saving rate - personal saving as a percentage of disposable personal income - was 5.8% in February, its highest since December 2012, compared with 5.5% in January.