Personal income grew by 0.1% for the month of January, a result that was below expectations, but sufficient to mark the seventh consecutive month of income growth.
Disposable personal income slipped 0.4% for the month, primarily a result of higher federal taxes payments for the month.
Personal spending grew by 0.5% in January, the fourth consecutive month of spending increases.
Personal spending is significantly off the year-over-year trough of -0.9%, the 50+ year low reached in July 2009.
January’s increase was largely attributable to demand for non-durable goods, which accounted for about three-quarters of the increase in personal outlays for the month.
Looking forward, a relatively smooth transition from spending juiced by government stimulus to organic demand-driven growth will be critical to the sustainability of the recovery.
We expect personal income to continue to grow, but increases will likely be held in check by the persistently large pool of unemployed workers.
We need to see improvement in both the willingness and ability of consumers to spend. Unfortunately, constraints on credit availability and expectations for muted job creation present substantial headwinds to a resurgent consumer.