29 Apr 2016
US: Income not followed by spending - Wells Fargo
Analysts from Wells Fargo, noted that personal income continues to grow but warned that inflation put a further damp on an already weak personal spending number and that personal spending is not following the rise in income.
Key Quotes:
“Personal income increased 0.4 percent in March, higher than market expectations for a 0.3 percent increase. However, growth in personal income was revised lower in February to only 0.1 percent, from an original increase of 0.2 percent.”
“The increase in wages and salaries was very strong, up $29.2 billion compared to a decline of $4.6 billion the previous month.”
“Although incomes have continued to increase, Americans have not followed with higher spending, a pattern that has been the rule since the recovery from the Great Recession. This mismatch between income and spending continues to push the savings rate higher. The economy would rather see more of these savings used for consumption to promote growth at a faster pace, but Americans seem to have different plans.”
“This may reflect the lack of confidence that consumers continue to have on the future of the U.S. economy.”
“What is interesting is that, under normal circumstances, strong growth in employment like the U.S. economy has had during the past two years and such a low rate of unemployment would have been enough to push consumers out of this negative stance regarding the future.”
“Whatever the reason is, Americans are building up a war chest for the future, which will come in handy if they finally decide to ramp up spending going forward.”
Key Quotes:
“Personal income increased 0.4 percent in March, higher than market expectations for a 0.3 percent increase. However, growth in personal income was revised lower in February to only 0.1 percent, from an original increase of 0.2 percent.”
“The increase in wages and salaries was very strong, up $29.2 billion compared to a decline of $4.6 billion the previous month.”
“Although incomes have continued to increase, Americans have not followed with higher spending, a pattern that has been the rule since the recovery from the Great Recession. This mismatch between income and spending continues to push the savings rate higher. The economy would rather see more of these savings used for consumption to promote growth at a faster pace, but Americans seem to have different plans.”
“This may reflect the lack of confidence that consumers continue to have on the future of the U.S. economy.”
“What is interesting is that, under normal circumstances, strong growth in employment like the U.S. economy has had during the past two years and such a low rate of unemployment would have been enough to push consumers out of this negative stance regarding the future.”
“Whatever the reason is, Americans are building up a war chest for the future, which will come in handy if they finally decide to ramp up spending going forward.”