Savings Rate Dips As Consumers Spend More, Earn Less In February

Tyler Durden's picture

While there was no surprise in this morning's release of the PCE data, which came at 0.2%, on top of expectations, and unchanged from January's revised 0.2%, it was the action at the consumer level that was notable, as Spending increased from a revised 0.3% to 0.7%, on expectations of 0.5%, while personal income declined notably from a revised 1.2% to 0.3%, below expectations, as US Consumer had to dip into their savings in the month of February. On the Personal Savings Rate: "Personal saving -- DPI less personal outlays -- was $676.7 billion in February, compared with $710.5 billion in January.  Personal saving as a percentage of disposable personal income was 5.8 percent in February, compared with 6.1 percent in January." As the chart shows, personal savings continue to trend in the 5-6% range, indicating that consumers are still uncertain whether to splurge or continue deleveraging.

Focusing on wages, from the report:

Private wage and salary disbursements increased $16.4 billion in February, compared with an increase of $16.7 billion in January.  Goods-producing industries' payrolls decreased $1.0 billion, in contrast to an increase of $12.0 billion; manufacturing payrolls decreased $1.6 billion, in contrast to an increase of $8.3 billion.  Services-producing industries' payrolls increased $17.4 billion,  ompared with an increase of $4.7 billion.  Government wage and salary disbursements increased $0.3 billion, compared with an increase of $2.5 billion.

On the tax witholding surge in January and why that is no longer the case in February, courtesy of the expiration of FICA benefits:

Personal current taxes increased $2.2 billion in February, compared with an increase of $55.4 billion in January.  The January change reflected the expiration of the Making Work Pay Credit provision of the American Recovery and Reinvestment Act of 2009, which had boosted federal withheld income taxes by $38.6 billion in January.  The January change also reflected increased federal net nonwitheld income taxes (payments of estimated taxes plus final settlements less refunds), which had boosted January net withheld taxes by $11.3 billion.  Disposable personal income (DPI) -- personal income less personal current taxes -- increased $36.0 billion, or 0.3 percent, in February, compared with an increase of $92.0 billion, or 0.8 percent in January.

And some highlights from other personal income:

Contributions for government social insurance -- a subtraction in calculating personal income --  increased $2.2 billion in February, in contrast to a decrease of $94.6 billion in January.  The January change reflected decreases in personal contributions for government social insurance and increases in employer contributions.  The January change in personal contributions for government social insurance reflected the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, which temporarily decreased the social security contribution rate for employees and self-employed workers by 2.0 percentage points for 2011, or $105.4 billion in January.  As noted above, employer contributions were boosted $7.5 billion in January by increases in the unemployment insurance rate.

Well the "fiscal" boost has now been completely digested. From here on out all stimulus is in Bernanke's hands.

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oh_bama's picture

The data must be wrong!

  • PEOPLE Are saving more! And the EARN more
  • Stock goes up everyday! Everything goes up everyday!
  • Inflation is LOW, inflation expectation is LOW, deflation RISK is high (according to the FED!!)

So people MUST BE saving money!!


Snidley Whipsnae's picture

Consumer's dollar buys less = must spend more dollars to bring home the bacon.

Definitely bullish...

SheepDog-One's picture

'House brand' cheap Checker Auto quarts of oil that used to go for under $1 are now $4.50.

CPL's picture

Two things that shouldn't ever go in an car.  Cheap oil and cheap women

SheepDog-One's picture

Now the good stuff Mobile 1 is about $8 a quart.

Bob's picture

Holy fuck!  Glad I picked up that 5 quart jug at Walmart last fall for $21.

But at those prices I'll be shifting back to ZMax treatment with cheap oil when it's time for a change.  It's a reasonable substitute. 

Iam_Silverman's picture

"Two things that shouldn't ever go in an car.  Cheap oil and cheap women"

However, both options always leave more money for cheap beer.  It's a win-win-win situation!

Yen Cross's picture

Retard! Purchasing power drops when yields increase. Demand for dollars, but tangibles also get more expensive. OIL GOLD FOOD Go back to Your law school in Texarcana! Bitch!

MachoMan's picture

Who the hell goes to law school in texarkana?

Racer's picture

Consumers forced to use savings for essentials that have gone up a lot in price (and far more than the fake inflation numbers)

monopoly's picture

they did not mention the decline in personal savings on the idiot channel. Must have just missed it. They always tell the truth.

SheepDog-One's picture

Of course The Blowhorn's job is to tell retail traders, the few left out there, to place their buy orders!

Loose-Tools's picture

With regards to retail traders, have you noticed that Gorilla Trades has been back advertising (OLD ads , by the way) again? I'm assuming they are aimed at retailers (would a Pro use this stuff?), and could be one sign of a top.

Ruffcut's picture

Trade tippers, are into a new batch of suckers trying to enter the market. Old ads are new to the newbees.

MiningJunkie's picture

Behavioural Economics is the order of the Day. Juice the E/S to new recovery highs and then watch the Wealth Effect influence spending. Rinse and Repeat.

North America is an economy dominated by paper-hangers and manipulation. "Tail wagging dog" involves focusing on the stock market first and corporate earnings and growth second. This travesty will have dire outcomes when production shortages arise because CEO's no longer have to worry about selling products as long as their share prices are rising thanks to the Fed.

overmedicatedundersexed's picture

one "totally expected" item that rarely gets mentioned -well with nukes and wars- it is less urgent..but

millions of baby boomers would presumably be de-leveraging out of equities and into fixed assets and Money markets - adding selling volume.

baby boomers would presumabley be tapping savings in retirement..this lowering saving rates..

yet stocks see buying on any dip

I am confused no doubt.

RobotTrader's picture

Looks like the Japan and MENA crisis is over.

EWJ green, EGPT green, gold stocks getting crushed pre-market.

Oil prices are down, probably see more strength in retail names again today.

Snidley Whipsnae's picture

Gold/silver options expiry today... big beat down from the ee... Blythe wears black, with whips and chains, on expiry...

Oil prices down because aircraft carriers up...

Nominal strength in retail... inflation adjusted?


alien-IQ's picture

with costs of living rising and incomes dropping...who can save?

TradingJoe's picture

Remember what Churchill said once: I trust only the statistics I forged!

Bubbles...bubbles everywhere's picture

People are spending more at the gas pumps.

I am Jobe's picture

What, job amrket is doing great. Companies are hiring and paying well. More Fast food restaurant jobs available. Yippe, road to recovery. Trillion dollars later nothing many we need several trillions to ensure we are deeper in debt. Find a tall tree and short rope for the lawmakers and the Bankers.

CPL's picture

The 5-6% the increase reflects basic food increases.  I'm bullish on meat, grain and corn.

Iam_Silverman's picture

"I'm bullish on meat"

Ahhh, subtle humor, I love it!  I'm guessing most would miss the implied pun:

"I'm bullish on beef, grain, and corn".

GrinandBearit's picture


Looks like we have an "alert" in Northern Alabama...

SheHunter's picture

Thanks for the link.  Had not seen this one before.


RobotTrader's picture

Amazing to see people buying TZOO and PCLN again pre-market after these stocks have had huge runs already.

I wouldn't touch these stocks, but Wall St. just loves these tech screamers with outlandish P/E ratios.

SheepDog-One's picture

Trillions in printed-up fiat liquidity have to go somewhere.

Djirk's picture

what earnings? dividends, no way? The street is addicted to has got it.

Jason T's picture

They should breakout savings rates for bottom 90%, top 10% and top 1% to get a better pic of true state of saving.


I imagine a huge % of that savings is coming from top 10%.  

MachoMan's picture

There is a large segment of the population that lives completely on sustenance payments from the government...  These people have limited means in which to save and, if they do save via traditional channels, then it causes significant red flags to arise...  needless to say, any increase in savings MUST come from the remainder of the population...  I'm not sure a detailed analysis of the various socio-economic classes is necessary given we already know the answer...

TradingJoe's picture

Will be another interesting week! Hedgies pushing down oil only to load up some more

No "bad news" in the MSM on MENA/Japan

Calm before the storm?

We'll see!

Johnny Lawrence's picture

From Art Cashin this morning:

Dorothy And Alice Yield Center Stage To Scarlett – The stock market rose for the
third day in a row Friday and for the sixth of the last seven sessions. The old adage is
that bull markets climb a wall of worry. This recent upswing has determined to storm
a rampart of concerns rather than simply scale a wall of worry.

Geo-political problems of every type from finance to radioactivity filled up the front pages of every prominent paper aroundthe globe. But, like Scarlett O’Hara in Gone With The Wind, stocks simply shrugged and said – “I’ll worry about that tomorrow”.

The clearest example may have come in the final ninety minutes of trading Friday. Rumors circulated that reactor #1 in the stricken nuclear plant in Japan had shifted into full meltdown mode. The rumors suggested there might even be a full 50 mile shutout zone around the reactor possible shutting down scores of factories permanently.

The market shrugged and gave up a point or two of its rally. Several traders suggested that this hinted you no longer seek safety in the dollar; you seek safety in the Dow. The theory (if I got it correctly) is that you skip the dollar since the Fed seems intent on driving it lower. But, you buy a big burly Dow stock which is situated in a politically stable country (relatively speaking) and who will benefit from that Fed weakened dollar.

A Man without Qualities's picture

"Several traders suggested that this hinted you no longer seek safety in the dollar; you seek safety in the Dow. "

What this tells me is we are really, really fucked.  It also tells me only the dumbest people are still trading equities...

RunningMan's picture

We can bypass the dollar because the Fed promised no companies will ever go bust - riskless trading is here. 

docj's picture

The impoverishment of what little remains of the American Middle Class is proceeding right on schedule.

Wakanda's picture

Doh!  They are buying iPad 2's.

themiestro's picture

Nice!  Bloomberg is calling it a spending spree.  MSM is so lost.  How is it a spending spree when you are paying more to get less.  Oh wait!  I think inflation might cause a result like that. 

SheepDog-One's picture

Biggest bunch of pom pom waving cheerleaders in the MSM ever. Really I just call them all whores now.

I am Jobe's picture

Once again the public lacks the critical thinking skills and piling up crap in their garage. Stupid Dumb Fucks in the USA and breeding more idiots.

Stuck on Zero's picture

When they refer to savings does that mean bullshit 0.25% interrest passbook savings?  (For which we are taxed on the interest?)  I think savings might be a bit higher if they count in ZHers who are stocking away gold and silver.

Iam_Silverman's picture

"passbook savings"

Is there such a critter these days?  I haven't had a passbook in, well, a very long time.

Djirk's picture

the big nugget, personal income declined notably from a revised 1.2% to 0.3%...the only rise in incomes was the guvMINT and services.

Howz that QE thing working out for ya Benny? Guess that weak dollar didn't help much.My bet is the services that grew were FIRE from all that freshly minted trading money.


tiger7905's picture

One has to wonder if a QE3 can keep it going or will anyone wise up.

Some good comments by Rickards on QE2, also his comments on the jabs between him and zerohedge.

Absinthe Minded's picture

ZH'ers are the only ones that will be getting real returns.

equity_momo's picture

When the pigs try to get at yea


Spend it like its hot

Spend it like its hot

Spend it like its hot

topcallingtroll's picture

A lower savings rate is a great sign! We need people to spend spend spend and take out more loans This is exactly what the fed has wanted. I am loving it that the america haters are disappointed that we havent collapsed yet. America will still be wealthy and economically powerful long after most america haters on this site are long dead. USA! USA! USA!

Iam_Silverman's picture

Yup debt is wealth.  Otherwise, banks wouldn't be able to list a loan to a subprime borrower as an asset, right?

The low interest rates paid on savings accounts are designed to force greedy people to take on more risk - hence they wade into the DOW and S&P to get sheared regularly.  Some people mistake the lower rates as a push to get the common folks to take on more leverage.  That is not exactly true - if the banks had to make loans to survive (vice acting as PD's), then you would see lower underwriting standards.  The fact is that they can "sit on cash" and still make more money, they just have to figure out how to do an end-around on the prop trading rules now.

The one result they had not foreseen was the larger demand for PM's that folks seeking higher (and more stable) yields created.  That is "revenue" they could not wring out of them in the bond or equity markets.  I'm sure that it will be addressed in the future.

Caviar Emptor's picture

Biflation, baby!

Money into pocket: down. Money out of pocket: up. 

Real economy down, paper economy up. Every data point is confirming. 


baby_BLYTHE's picture

The market is almost at the same height it attained prior to the "Greatest Collapse since the Great Depression".

If QE is so great, why hasn't the FED attempted this before?

Who needs a bear market anymore?

You cannot make this shit up!

ugh, so depressing!