There is spending and income and then there is spending an income adjusted for price increases. The Personal Income and Outlays report covers individual income, consumption and savings. Consumer spending increased 0.2% from last month, but after taking price increases into account, there was actually no monthly change. While disposable income increased by 0.1%, when adjusted for inflation, disposable income actually dropped, -0.1%. Personal income increased 0.3% from December to January. The personal income & outlays report is seasonally adjusted.

Personal consumption expenditures are often called consumer spending and in real dollars, or adjusted for price increases, was zero for January. Real Personal Consumption Expenditures, or PCE, are about 70% of GDP. Real means chained to 2005 dollars, or adjusted for inflation. Below is a graph of real PCE.

 

 

Consumer spending is not just smartphones, toys and Starbucks. Things like housing, healthcare, food and gas are part of consumer spending. Consumer spending for the majority is spending to pay basic living necessities. Graphed blow is the overall real PCE monthly percentage change.

 

 

Here's what people spent money on in January, adjusted for prices, or in real dollars. Health care, for example, is a service. Gasoline is a nondurable good. Cars, which people bought, are a durable good.

Purchases of durable goods increased 0.9 percent, compared with an increase of 0.7 percent. Purchases of motor vehicles and parts accounted for most of the increases in January and in December. Purchases of nondurable goods
increased less than 0.1 percent in January, in contrast to a decreas e of 0.5 percent in December. Purchases of services decreased 0. 1 percent, in contrast to an increase of less than 0.1 percent.

Price indexes are used as divisors to adjust for inflation and price changes. The indexes are used to compute spending and income for an apples to apples, real dollar comparison to previous months and years. Economic statisticians use real dollars so one does not erroneously assume economic growth when it's really inflation.

The PCE price index increased +0.1% for January and is up +2.4% from a year ago. Minus energy and food, the price index increased +0.2% and is also up +1.9% from this time last year. While the PCE price index represents inflation, it is different from CPI.

To make this report appear even worse, personal income was affected by a host of expiring tax credits. From the BEA report:

The January change in disposable personal income was affected by several special factors. Personal income in January was boosted by pay raises for federal military personnel and cost-of-living adjustments to government social security benefits. Personal income in January was reduced by the expiration of refundable tax credits within “other” government social benefits to persons, by annual adjustments to personal contributions for government social insurance (a subtraction in the calculation of personal income), and by lump-sum social security benefit payments that had boosted December personal income. Personal current taxes, which are a subtraction in the calculation of DPI, were boosted in January by federal net nonwithheld income taxes.

Excluding these special factors, which are discussed more fully below, DPI increased $19.4 billion, or 0.2 percent, in January, following an increase of $41.3 billion, or 0.4 percent, in December.

Personal income increased +0.3% in January and these numbers are the total for everybody in the United States who is reported and not part of the underground economy. Below is personal income, not adjusted for inflation, or price changes.

 

 

Real personal income, or personal income adjusted for inflation, via the PCE price index, and also government payments removed, was up +0.2% for January. Below is the graph of real personal income. While personal income is everybody, all income in the U.S., we can see, when adjusted for inflation, personal income is just catching up with levels, on aggregate, from 3 years ago.

 

 

Disposable income is what is left over after taxes. DPI (disposable income), increased 0.1% from December. DPI adjusted for inflation (see the price indexes above), decreased, -0.1%, from the previous month. These numbers are aggregates, which includes income of the uber-rich, or the 1% of the population, as they are now called.

 

 

Below is real disposable income per capita. Per capita means evenly distributed per person and population increases every month. January mid-month the U.S. population was 313,279,000. In other words, while on aggregate personal income has increased, so has population to earn that income. When taking increased population into account, we basically have no growth in real personal income.

 

 

Interesting reality check huh? It seems politically, any mention of the effects of population on aggregate data is a no no and dismissed. Disposable income, when spread across increased population growth and adjusted for inflation shows it's often worse news, which makes declines even more miserable. The numbers reported in the press headlines are aggregates, or the total, regardless of how many more people are in the country.

The monthly percentage change for wages and salaries was 0.4%, with total employee compensation, which includes wages, salaries, benefits, also increasing 0.4%. Landlords made out like bandits, their income increased 0.9% in a month. Personal interest income and dividend income increased by 0.4%. This is income from non-incorporated businesses, such as the self-employed.

Private wage and salary disbursements increased $25.5 billion in January, compared with an increase of $29.9 billion in December. Goods-producing industries' payrolls increased $10.0 billion, compared with an increase of $13.5 billion; manufacturing payrolls increased $7.9 billion, compared with an increase of $8.5 billion. Services-producing industries' payrolls increased $15.5 billion, compared with an increase of $16.5 billion.

Government wage and salary disbursements increased $1.5 billion, in contrast to a decrease of $0.1 billion. Pay raises for military personnel added $1.8 billion to government payrolls in January.

Below are wages and salaries for the past decade. Notice the dip and the more flat line than earlier in the decade. Bear in mind these are aggregate, or all wages and salaries, and not adjusted for inflation.

 

 

Below is personal income minus personal current transfer receipts. This graph shows how much personal income increased that wasn't funded by the government and is used as a recession indicator. Transfer receipts are payments from the government to individuals where no actual services (work) was performed. This includes social security, unemployment insurance, welfare, veterans benefits, Medicaid, Medicare and so on. Transfer receipts monthly change was –0.2%. In chained 2005 dollars, real personal income minus transfer receipts increased +0.2% from last month. Notice real personal income minus transfer receipts is below pre-recession levels. Real income, has not recovered from this recession (or maybe 2001 as well), and this should be no surprise from the unemployment rate alone.

 

 

Transfer receipts had a host of changes. Below is the BEA description:

Personal current transfer receipts decreased $3.6 billion in January, in contrast to an increase of $13.8 billion in December. Within personal current transfer receipts, “other” government social benefits to persons decreased $14.9 billion in January, in contrast to an increase of $1.5 billion in December. The January change in “other” government social benefits to persons reflected a decrease of $13.6 billion due to the expiration of the Making Work Pay refundable tax credits. Government social benefits for Medicaid decreased $7.8 billion in January, in contrast to an increase of $0.2 billion in December. Government social benefits for social security increased $20.3 billion in January, compared to an increase of $9.6 billion in December. The January change reflected 3.6-percent cost-of-living adjustments (COLAs) to social security benefits and to several other federal transfer payment programs. Together, these COLAs added $30.2 billion to the January increase in government social benefits to persons. Partly offsetting the effects of the COLAs on social security benefits was a reduction in lump-sum payments, which had added $7.1 billion to December benefit payments; the December benefit payments resulted from a recalculation of the earnings base underlying the benefits for recent retirees.

Contributions for government social insurance -- a subtraction in calculating personal income -- increased $9.6 billion in January, compared with an increase of $3.8 billion in December. The January increase reflected increases in both employer
and personal contributions for government social insurance. As noted above, employer contributions were boosted $4.1 billion in January by increases in unemployment-insurance tax rates and in the social security taxable wage base. The January
increase in personal contributions for government social insurance reflected increases in the monthly premiums paid by participants in the supplementary medical insurance program (Medicare B) and in the social security taxable wage base; together, these changes added $1.6 billion to the January increase.

Personal savings is disposable income minus outlays, or consumption and not adjusted for inflation. The Personal Savings Rate was 4.6% in January.

 

 

Below is disposable personal income minus personal consumption expenditures monthly raw total changes.

 

 

Personal Outlays are PCE, personal interest payments, and personal current transfer payments. PCE is defined above by percentages is almost all of personal outlays. Personal interest payments are things like the interest you pay on your credit card. Personal transfer payments are defined as:

Payments consisting of transfer payments by persons to government and to the rest of the world. Payments to government include donations, fees, and fines paid to Federal, state, and local governments, formerly classified as "personal nontax payments."

In other words, personal transfer payments are nothing more than that speeding ticket you just got or how you just donated to this site. People often confuse transfer payments with transfer receipts, not the same thing.

To visualize more data from this report, consider playing around with more of the St. Louis Federal Reserve Fred graphs.

Here is November's report overview, not revised.