Following December's worse than expected drop in personal spending (and slowing groweth in incomes), analysts wewre expected the usual hockey-stick bounce... it did not happen. Despite all the exuberance over low gas prices, US personal spending dropped 0.2% in January - twice as bad as the 0.1% drop expected and the 3rd miss in a row. The spending drop was driven in large part by a slide in non-durables. Personal income also missed excpectations, rising just 0.3% (against a +0.4% expectation) hovering at its lowest growth since September. The savings rates surged to 5.5% - its highest since Dec 2012.
Spending drops again and misses for 3rd month in a row...
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The reason for the drop? Continuing declines in non-durable spending, as a result of lower gas prices.
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As is clear from the right hand side - the gap (savings) is widening
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As the savings rate jumps to its highest since 2012...
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Not what Yellen wants to see, because what the above data suggests, at least until its revision is that US consumers - waiter and bartender "recovery [9]" notwithstanding - are saving the "gas tax cut" instead of spending it. Time to call the Keynesian police and instite a few executive orders or better yet, start punishing US savers just like in Europe.
