Blame It On The Weather? Personal Spending On Services Highest Ever In January
Moments ago the BEA released the January personal income and spending data, which surprised to the upside on both sides: Personal Income rose 0.3% in January, on expectations of a 0.2% increase, while spending roared up by 0.4% well above the 0.1% expected. Great news right? Well, not exactly.
First the December spending data was revised from 0.4% to 0.1%, just as expected, following the big miss in last week's Q4 GDP revision. Second, of the $43.9 bilion increase in Peronal Income, some $29.8 billion, or over two thirds, was thanks to personal current transfer receipts, i.e., the government. But it was the personal spending breakdown that was truly surprising. One would think that based on a "bullish" take of the data, consumers opened up their wallets and purchased durable goods, such as TVs, gizmos, and what not, boost retailers top and bottom lines? Alas, that is not the case. The chart below shows the monthly increase in spending on durable and non-durable goods. Both declined.
So what happened in January to account for this spending spree? The chart below of spending on Services should explain it. Not the outlier spending in January, when "harsh weather" was said to have ground spending to a halt.
And there you have it: all services, in fact, in January US consumers spent a record amount of $72 billion on services. So, the Service Recovery, if not so much Goods. It appears the weather was so harsh and horrible it led to... the largest spending on services in history! Of course, nobody will mention this as it is a favorable benefit from the weather: remember the propaganda only identifies the negative data and scapegoats it with snow in the winter.
As for where US consumer got the funding, simple: personal savings declined once again, down to $540.1 billion from $544.5 billion, the fourth consecutive monthly drop, even if the savings rate of 4.3%, the lowest since March 2013, was more or less unchanged from the prior month.
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