By : Jade R. Gardener
The release of February’s personal income report overall has been rather disappointing.
The personal income report reveals the minimal personal income increase of 0.2%, and a equally underwhelming 0.2% increase in disposable personal income. These numbers reveal that growth in the area of spending is miniscule as Americans appear more reluctant to spend their income .
This less than boastful growth is also a result of both a revision of January’s consumer spending numbers and February’s lackluster increase in personal income. Also noteworthy was minor 0.1% gain in personal consumer expenditure (PCE).
Naomi Buie, a retail buyer in New York City, is one of those Americans who found an increase in their personal income after receiving a new job in February. This increase in personal income however is not encouraging Buie to spend more that she did in January. “Yes, I received an increase in my salary but it doesn’t make me want to spend more. I am more cognizant of my spending since the economy is just fully coming out of a recession”, said Buie.
“It shouldn’t necessarily surprise us that the consumer was holding back,” said Mark Hamrick, senior economic analyst at Bankrate. Hamrick believes that the behavior displayed by Ms. Buie is an example of now a normalized behavior of spending less, over the past years in and following the Great Recession. As a consequence to this we are now seeing a more fragile first quarter than expected.
This disappointment is a factor for many economists on the outlook for signs of what we will see in inflation and what the Federal Reserve will do regarding interest rates. “We expect the core inflation rate to fall back towards 1.5% by mid-year, before slowly heading back to target need to raise rates,” said Millan Mulraine, Deputy Chief US Macro Strategist at TD Securities USA. “The weak spending profile has resulted in our tracking for quarter one’s GDP which speaks to the weakening domestic economic momentum at the start of this year – further reinforcing the Fed’s cautious monetary policy bias”.
As March comes to a close, economists everywhere brace to see if the next personal income reports reveal even more disappointment.