The most recent data release from the Bureau of Economic Analysis shows that personal income was up by 0.2% in February after a 0.1% dip in January 2019. The increase of personal income in February was mostly driven by increases in wages and salaries, government social benefits to persons, and proprietor’s income. Real disposable income*, income after adjusted for taxes and inflation, slipped 0.2% in January. This was the first decline since April 2018 and followed a 1.0% increase in December 2018.

Personal consumption expenditures (PCE) rose 0.1% in January. After accounting for inflation, real PCE increased 0.1% after a decrease of 0.6% in December 2018. Spending rose slightly in January, primarily because of increases in spending for services, mainly financial services and insurance. On a year-over-year comparison, real personal consumption increased 2.3% in January.

In January, savings decreased to $1,188.3 billion from 1,229.5 billion in December, and the savings rate slipped to 7.5% from 7.7% as well. After 2016, the savings rate stayed in the 6%- 8% range, according to the July 2018 major data revision. The savings rate rose with the onset of the Great Recession as households repaired their balance sheets. However, this process of deleveraging held back GDP growth due to reduced consumption.

*Due to the recent government shutdown, the February estimates only include personal income.