Personal Spending Limps Along, But Gas Prices Could Cripple It

by: Tom Lindmark

The BEA is out with its monthly Personal Income and Outlays report. Here are the headline numbers as reported by Calculated Risk:

Personal income increased $38.1 billion, or 0.3 percent … Personal consumption expenditures (PCE) increased $69.1 billion, or 0.7 percent.

Real PCE — PCE adjusted to remove price changes – increased 0.3 percent in February, in contrast to a decrease of less than 0.1 percent in January.

The astute readers of this blog don’t need to be reminded that what matters is the growth in real PCE, not the nominal numbers, and that growth rate is to say the least less than robust. We will have to wait and see what March brings us but it appears pretty certain that we can expect PCE growth far below the 4% recorded in the 4th quarter.

There’s a lot of spin out there playing these numbers as something quite positive for the economy. Joe Weisenthal waxes enthusiastic and Dan Indiviglio tries to bury the effect of higher gas and food prices. Don’t buy into it, this was a very modest uptick PCE.

The economy isn’t going in the toilet — yet. By the same token growth is still anemic and I will continue to stick my neck out and say that if gas prices spike up much more, we could see it hitting stall speed.