Consumer Bites the Dust in First Quarter

Real personal income rose 0.2% in February but real spending is flat. For 2018, real spending is negative.

The BEA's Personal Income and Outlays report for February 2018 is negative for first quarter GDP.

  • Disposable Personal Income (DPI) jumped 0.4 percent in February, but real (inflation-adjusted) DPI rose only 0.2%.
  • Personal Consumption Expenditures (PCE) rose 0.2% but real consumer spending was flat.
  • Last month I reported Consumer Spending +0.2% Prices +0.4%: Real Spending Declined 0.1%.
  • Today we see a negative revision taking January real spending to -0.2%.

The economic illiterates are cheering the rise in inflation. The consumer clearly isn't.

This was expected behavior, at least in this corner. It's payback for the fourth-quarter hurricane-related spending spree.

Before anyone gets excited about wages, how is the wage growth distributed? How did the median wage-earner fare compared to consumer prices?

That data is not available yet, but I strongly suspect the median wage earner got hammered.

Two months of the first quarter are in. The consumer is not leading the way as most expected.

Mike "Mish" Shedlock

Comments (8)
No. 1-8
AWC
AWC

Still muddling through. Seems when markets get restless, the planners take action. Sometimes it looks as though these processes are going to remain irrational longer than the doom and gloom punditry can remain solvent.

Ambrose_Bierce
Ambrose_Bierce

and the difference is probably what is required to service their debt, never mind the governments

Carl_R
Carl_R

I will ask again, why is it surprising that consumers spent less in January than they did in December? Isn't that true every year? It doesn't say that the numbers are seasonally adjusted. For me a more relevant question is, how does consumer spending in January 2018 compare to January 2017?

Robin Banks
Robin Banks

https://www.theguardian.com/business/2018/mar/29/household-spending-hit-six-year-low-in-2017-amid-brexit-inflation . Pretty much the same picture in the 51st State. A company called Bargain Booze went boost today in Britain putting 2500 jobs at risk. When people are cutting back on cheap alcohol you know the brown stuff is coming.

jiminy
jiminy

It has to be the weather. everybody knows the economy is booming.

Mike Mish Shedlock
Mike Mish Shedlock

Editor

Damn. I forgot about that.

El_Ted0
El_Ted0

They shut the entire state down when there's two inches of snow now; that's part of the 1Q GDP problems these days.

Pater_Tenebrarum
Pater_Tenebrarum

What action has been taken? As far as I can see all that happened was that the Fed hiked rates again and LIBOR keeps rising day in day out. I think it's the people owning the most overvalued stock market in history that need to look for some warm clothes as we say here. Apart from the fact that the charts look atrocious by now, there is a considerable and intractable problem: true broad US money supply growth has collapsed to just 2.67% y/y as of February - the lowest reading since early 2007. This is well below the bubble alarm threshold of 5% y/y and we are beginning to get our first glances at the lagged effects of this decline making themselves felt. And there is nothing anyone can do about it, unless they have a time machine.