January 2021 Real Income Grew Due To Stimulus

The data continues to be affected by the pandemic. Expenditures improved month-over-month (but is in contraction year-over-year) whilst income improved month-over-month mostly due to the stimulus payments.

Analyst Opinion of Personal Income and Expenditures

The note from the BEA says it all:

The increase in personal income in January was more than accounted for by an increase in government social benefits to persons as payments were made to individuals from federal COVID-19 pandemic response programs. The increase in "other" benefits primarily reflected economic impact payments distributed through the CRRSA Act. Unemployment insurance also increased, reflecting an increase in pandemic unemployment compensation, including supplemental weekly payments to unemployment beneficiaries re-introduced by the CRRSA Act

The $340.9 billion increase in current dollar PCE in January reflected an increase of $277.2 billion in spending for goods and a $63.7 billion increase in spending for services. Within goods, the increases were widespread across all categories, led by recreational goods and vehicles (notably, information processing equipment) as well as food and beverages, based on Census Monthly Retail Trade Survey (MRTS) data. Within services, the increase was led by spending for food services and accommodations (more than accounted for by food services), based on MRTS data. Spending for health care (led by outpatient services) also increased, reflecting data on the volume of visits as well as revenue data. Partly offsetting these increases was a decrease in housing and utilities (led by electricity and gas), reflecting data from the Energy Information Administration.

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. As an example, this month's backward revision:

Estimates have been updated for July through December 2020. For July through September, estimates for compensation, personal taxes, and contributions for government social insurance reflect the incorporation of the most recently available third-quarter wage and salary data from the Bureau of Labor Statistics' Quarterly Census of Employment and Wages program. 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.

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