Statistics point to sluggish recovery
Personal spending is on the rise, but weakness in incomes, construction and manufacturing suggests that the economic recovery will continue to be sluggish, according to new government figures.
Nominal personal income inched up $11.4 billion, or 0.1%, in January after growing 0.3% in December, the Bureau of Economic Analysis reported. Though incomes have risen for six consecutive months, the latest increase was comparatively small.
Throughout last year, incomes fell 1.7%, following a 2.9% boost in 2008, the agency said. For the first time in more than three decades, Social Security recipients did not get a cost-of-living adjustment in January.
But private wages and salaries soared $16.1 billion, compared with a $2.3-billion climb in December. Government wages and salaries were up $6.1 billion.
Personal spending rose $52.4 billion, or 0.5%, in January, according to the agency. Spending, which makes up the vast majority of total economic activity, climbed 0.3% in December.
But consumers are saving less -- the personal savings rate fell to 3.3% in January, from 4.2% in December, the lowest percentage since the 2.9% posted in October 2008. The amount saved dropped to $367.2 billion from $467.9 billion.
Real disposable income, adjusted to account for price changes, suffered the largest tumble in seven months.
After taxes and inflation, the measure fell 0.6% in January after rising 0.2% the month before.
A key inflation gauge showed little movement. The core price index for personal consumption expenditures without volatile food and energy prices rose less than 0.1% in January. With food and energy, the index increased just 0.2%.
“Lower income growth and lower saving rate suggest that consumers will be more cautious in the months ahead, keeping a lid on consumer confidence and discretionary spending,” several economists wrote in a research note from PNC Financial Services.
Construction continued several months of declines, sliding 0.6% in January to a seasonally adjusted annual rate of $884.1 billion, according to another report from the Commerce Department, this time through the Census Bureau. The number is 9.3% below the $975.3 billion recorded in January 2009.
Spending on residential projects was up 1.1% to $269.1 billion in January, but that was down 6% from the previous January. Single-family home construction fell for the first time in eight months.
Nonresidential construction fell 1.4% in January and 10.6% compared with a year prior, with spending down for hotels, office buildings, hospitals and many sectors.
“The outlook for private nonresidential construction over the next two years is grim due to overbuilding, the collapse of the securitization market, tight credit, plunging real estate prices, rising vacancy rates and rising unemployment,” said Patrick Newport, economist for IHS Global Insight.
