American consumers cautiously increased their spending in February as personal income raised at a slower pace comparing to previous month, the U.S. Department of Commerce reported Friday.
The last release reveals that economic growth remains sluggish as personal income and spending rose moderately by 0.2% and 0.1%. Despite the data being slightly more optimistic than the forecasts – with the Bloomberg’s consensus estimate at 0.1% on both indicators – the announcement wasn’t a revelation for the analysts who predicted a slowdown comparing to previous values in January.
“The U.S. economic growth is slow and this is no surprise,” said Guy LeBas, head of Public Finance at the financial services firm Janney. Among the factors LeBas indicates as causes there is a slower population growth rate and lower returns from technology.
The surprise came with the wage contraction: last reports indicates that wages and salaries decreased $9.4 billion in February, in contrast to an increase of $46.5 billion in January. “It is rather atypical to see both growth in the number of jobs and contraction in the wages,” LeBas said.
Millan Murlaine, Deputy Head at TD Securities, attributes this anomaly to a statistical calculation inaccuracy: both economists agree that calculating the average between the data of January and February can give a clue about the real wage growth.
But according to Murlaine the wider issue regards the decline in the aggregate hours worked: “Even with an increased in payrolls […] with aggregate hours declining, naturally, you would expect income to fall. That is what explains the decline in wage income,” he said.
On a side note, the release also readjusted the values for the spending in January that was revised down at 0.1% from a solid 0.5%.
The weak consumer spending over the first two month of 2016 pairs up with overall retail sales that were down by 0.1% in February according to the latest report last week. This combination translates the uncertainty among the American households amid volatile international markets and that will very likely reflect in the next month release of the first quarter’s domestic economic growth figures.
“I come here to save on my shopping,” said Hale Khojasteh in front of the grocery Trader’s Joe in Brooklyn. Khojasteh is an art teacher and a student in psychology and, like many New Yorkers, has to battle with high rents and a high cost of life: “keeping up is a daily struggle,” she said.
“Save more spend less” is not a good refrain as for the U.S. economy in which personal consumptions expenditure accounts for 2/3 of its value.
Roberto Capocelli