Personal income as reported up .4 with spending only up .1 = increased savings. However, while that counts most of the income gained by those who gained from the oil price decline, I suspect it does not include quite a bit of the income lost by those who got hurt by the decline in oil prices, as that lost ‘income’ is often outside the definition of ‘income’ included in this report. And much of that lost income that is included is likely estimated, as much of it goes unreported on a monthly or even quarterly basis. If so, both income and savings are being over reported by what I’m thinking is about .2 on the income side, which pushes the savings down below ‘normal’ and is also consistent with declining personal consumption expenditures.
Personal Income and Outlays
In February, personal income growth remained healthy but spending and inflation were soft. Personal income advanced 0.4 percent after posting an equal gain of 0.4 percent in January. February topped expectations for a 0.3 percent gain. The wages & salaries component increased 0.3 percent, but followed a robust 0.6 percent the prior month.
Personal spending made a partial rebound of 0.1 percent after declining 0.2 percent in January. Analysts forecast a 0.2 percent rise. Durables fell 1.0 percent, following a 0.4 percent rise in January. Nondurables made a 0.4 percent comeback after plunging 2.5 percent in January. Services advanced 0.2 percent after a 0.4 percent boost in January.
Prices at the headline level rebounded a moderate 0.2 percent, following three declines including 0.4 percent for January. Market expectations were for 0.2 percent. The core PCE price index rose 0.1 percent, matching the pace in January and expectations.
Income growth was moderately strong in February. But spending has been softening in recent months due to adverse weather and lower energy prices. But the consumer sector has fuel for spending. Inflation continues to be low and well below the Fed’s target of 2 percent year-ago inflation, meaning the Fed likely will stick with no rate hike before mid-year.
Better than expected but it remains at depressed levels with easy comparisons with last year’s extra cold winter compared with this year’s colder than average winter, which some how resulted in a 35,000 home jump- a 157% increase- in new home sales in the northeast to cause that report to spike some.
Pending Home Sales Index
Pending home sales picked up steam in February, up a much stronger-than-expected 3.1 percent on top of a 1.2 percent revised gain in January. This is the first back-to-back gain since April and May last year. Today’s report is a second shot in the arm for the ever-lagging housing sector, following last week’s big surge in new homes sales.
By region, the Midwest shows a strong February gain for pending sales as does the West, a region where sales of existing homes have been flat. The South, by far the largest housing region, and the Northeast, by far the smallest, show small monthly declines.
Year-on-year, pending home sales, which are defined as contract signings for existing homes, are up a robust-looking 12.0 percent which is a 6th straight increase. But this is misleading as many deals fall through. Final sales of existing homes, in data posted last week, are up only 4.7 percent year-on-year.
Unambiguous big fat whopping negative, therefore largely unreported:
Dallas Fed Mfg Survey
Texas factory activity declined in March. The production index, a key measure of state manufacturing conditions, fell to minus 5.2, posting its first negative reading in nearly two years.
Other measures of current manufacturing activity also reflected contraction in March. The new orders index pushed further into negative territory, coming in at minus 16.1, and the growth rate of orders index remained negative for a fifth consecutive month but edged up to minus 15.3 in March. The shipments and capacity utilization indexes slipped to more negative readings, minus 8.7 and minus 6.4, respectively.
Perceptions of broader business conditions were rather pessimistic for a third month in a row. The general business activity index declined 6 points to minus 17.4 in March, while the company outlook index was largely unchanged at minus 4.
Labor market indicators reflected slight employment declines and shorter workweeks. The March employment index dipped to minus 1.8, its first negative reading since May 2013. Thirteen percent of firms reported net hiring, compared with 14 percent reporting net layoffs. The hours worked index has been gradually declining for six months and came in at minus 5.3 in March, down from minus 1.6 in February.
Prices declined in March, and upward pressure on wages continued to ease slightly. The raw materials prices index fell to minus 9.4, its lowest reading since May 2009. The finished goods prices index pushed further negative to -9.8, also reaching a low not seen since 2009. The wages and benefits index came in at 15.6, down from 16.8 in February.
Expectations regarding future business conditions remained fairly weak in March. The index of future general business activity edged down to 3, while the index of future company outlook inched up to 12.8. Both indexes remain well below the levels seen throughout 2014. Indexes for future manufacturing activity, however, improved markedly in March. The indexes of future production, capacity utilization and growth rate of orders posted double-digit gains from their February readings.
According to the Dallas Fed report, both manufacturing and prices are soft-leaving the Fed in a likely dovish mode. Texas has the second largest manufacturing sector, following California. So far, regional manufacturing surveys point to sluggish manufacturing activity in March.