January personal income largely reflects stimulus controls – Wells Fargo

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During January, personal income increased 10%. Wells Fargo Analysts explain that the number reflects stimulus controls that also boosted spending. Despite the 2.4% increase in personal spending in January, they note that the faster increase in income raised the personal savings rate to 20.5% in January.

Key statements:

“Personal income soared 10% in January, largely reflecting the stimulus checks that were issued as part of the December aid bill. While government transfer payments were the biggest driver of revenue growth, they were not the only driver. “

“In the absence of the stimulus controls, personal income would have been unchanged in January; personal income, excluding government transfers, decreased 0.1% during the month. “

“Last week’s January retail sales report beat consensus expectations, and most forecasters weren’t going to be caught off guard again this week. The consensus expectation of a 2.5% month-over-month increase in personal spending would have been a percentage point larger than any monthly gain since the reopening after the closings raised spending figures in May and June. The actual figure was just one notch below sky-high expectations, as spending increased 2.4%. “

“We can’t imagine a more telling indication of pent-up demand for services than the fact that people are willing to brave the cold or take home dinner in a paper bag.”

“Despite the 2.4% increase in personal spending in January, the faster increase in income raised the personal savings rate to 20.5% in January. We estimate that “surplus” savings, or recent high levels of savings compared to personal savings rates before the virus, currently amount to $ 1.7 trillion. “

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