Personal income growth saw a rise in December, with an unexpected drop in January.
The report released by the Commerce Department on Friday showed personal income fell by 0.1 percent in January, the first decline in three years since November 2015, after a surge of 1 percent in December, a figure far above economists projections.
The uptick in December income of $83.4 billion resulted from a one-time special dividend payout by one corporation, VMare Inc,. and special subsidies by the Trump administration for farmers affected by the trade war, boosting farms proprietors income to $29.2 billion.
“We had a temporary boost in December,” said Ryan Sweet, director of Real-Time Economics at Moody’s Analytics. “The strong gain was attributed to two temporary factors.”
Consumer spending in December, however, showed a decrease by 0.5 percent, the biggest since 2009. The report only included purchasing data as a result of a delay in the release of the Census Bureau’s Advance Monthly Retail Sales.
Personal savings in December edged up 7.6 percent, an uptick from November’s personal savings rate of 6.1 percent. Overall savings increased to $1.2 trillion, the highest since December 2012. Consumer pending took a plunge of 1.9 percent with cut backs on recreational goods and motor vehicles.
Economists forecasted a gain between 0.2 and 0.3 percent in income for the month of January. Spending and PCE inflation were not included in the report due to the recent partial government shutdown.
Data showed the decline in personal income in January was a result of decreases in personal dividend income, farm proprietors’ income and personal interest income.
“In January it looks like the financial market conditions finally caught up to personal income, so a drop in dividends. Also the partial government shutdown, showing that farm subsidies didn’t appear to have been paid out on time,” said Sweet.
Fewer payments to offset the costs and impacts of tariffs in January led to a negative impact on farmers. However, wages and salaries saw modest but positive gain with 0.3 percent following a rise of 0.5 percent in December.
“The overall number is a very misleading view of the capacity of households to spend,” said David William Berson, senior vice president and chief economist of Nationwide Insurance.
Delays from the government shutdown continue to impact economic data available. In the next report set to release on March 29, January data on spending and PCE inflation will be included along with February data on incomes.
“The decline was narrowly focused in the farm sector and is not likely to continue. The drop in January is likely to be short-lived,” said Berson.