February 2021 Real Income And Expenditures Declined

The data continues to be affected by the pandemic. Expenditures declined month-over-month (and is in contraction year-over-year) whilst income also declined month-over-month but is in expansion year-over-year.

Analyst Opinion of Personal Income and Expenditures

The note from the BEA says it all:

The decrease in personal income in February was more than accounted for by a decrease in government social benefits to persons. Within government social benefits, "other" social benefits, specifically the economic impact payments to households, decreased. The CRRSA Act authorized a round of direct economic impact payments that were mostly distributed in January (table 3).

The $149.0 billion decrease in current dollar PCE in February reflected a decrease of $155.9 billion in spending for goods and a $7.0 billion increase in spending for services (table 3). Within goods, the decreases were widespread across most categories, led by "other" nondurable goods (mainly pharmaceutical products and recreational items). Partly offsetting these decreases was an increase in gasoline and other energy goods. The increase in services primarily reflected increases in housing and utilities and in health care (mainly hospitals) that were partly offset by a decrease in spending for food services.

The real issue with personal income and expenditures is that it jumps around because of backward revisions - and one cannot take any single month as fixed or gospel. This month's backward revision:

Estimates have been updated for October through January. Revised and previously published changes from the preceding month for current-dollar personal income, and for current-dollar and chained (2012) dollar DPI and PCE, are shown below.

This should be considered a better report than last month.

  • The market looks at current values (not real inflation-adjusted) and was expecting (from Econoday):.
  Consensus Range Consensus Actual
Personal Income - M/M change -8.0 % to 2.8 % -7.2 % -7.1 %
Consumer Spending - M/M change -1.2 % to 0.6 % -0.6 % -1.0 %
PCE Price Index -- M/M change 0.2 % to 0.4 % +0.3 % +0.2 %
PCE Price Index Y/Y change 1.6 % to 1.8 % +1.7 % +1.6 %
Core PCE Price Index - M/M change 0.1 % to 0.3 % +0.2 % +0.1 %
Core PCE price index - Yr/Yr change 1.4 % to 1.7 % +1.5 % +1.4 %
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