THIS FOOL BUILT THIS STORY
Today’s economic report has good and bad news, and both are tempered by the effects of government intervention. The Commerce Department reports that personal income dropped 3.6% in January, the worst such monthly decline in exactly 20 years, but that consumer spending seems unaffected:
Personal income decreased $505.5 billion, or 3.6 percent, and disposable personal income (DPI) decreased $491.4 billion, or 4.0 percent, in January, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $18.2 billion, or 0.2 percent. In December, personal income increased $353.4 billion, or 2.6 percent, DPI increased $325.7 billion, or 2.7 percent, and PCE increased $14.8 billion, or 0.1 percent, based on revised estimates.
Real disposable income decreased 4.0 percent in January, in contrast to an increase of 2.7 percent in December. Real PCE increased 0.1 percent, the same increase as in December.
Before we pull this apart, let’s take a look at the AP’s analysis of the report:
The Commerce Department says consumer spending rose 0.2 percent in January. The gain was driven by an increase in spending on services, primarily reflecting higher heating bills. Spending on durable goods such as cars and non-durable goods such as clothing actually fell.
Income growth fell 3.6 percent in January, the biggest drop since January 1993. But it followed a hefty 2.6 percent rise in December. The December gain reflected a rush by companies to pay dividends and bonuses before income taxes increased on top earners.
Analysts surveyed by Reuters forecast income fell by 2.2 percent in January after rising 2.6 percent in December, while spending increased for a second consecutive month by 0.2 percent.
In other words, this was a big miss by Reuters’ analysts. The December increase in dividend payments was an artificial distortion of the market because of the fiscal-cliff standoff, which by that time seemed certain to raise tax rates.
READ MORE AT http://hotair.com/archives/2013/03/01/personal-income-drops-in-january-by-largest-monthly-amount-in-20-years/