Home   Logon   Mobile Site   Research and Commentary   About Us   Call 1.800.621.1675 or Email Us       Follow Us: 

Search by Ticker, Keyword or CUSIP       
 
 

Blog Home
   Brian Wesbury
Chief Economist
 
Click for Bio
Follow Brian on Twitter Follow Brian on LinkedIn View Videos on YouTube
   Bob Stein
Deputy Chief Economist
Click for Bio
Follow Bob on Twitter Follow Bob on LinkedIn View Videos on YouTube
 
  Personal Income Rose 0.6% in December
Posted Under: Data Watch • PIC

 

Implications:  Incomes rose while spending took a dip in December, as new stimulus started to take hold, but a slowdown in consumer purchases (in part, due to a return of economic restrictions) served as a headwind.  On the income side, gains were led by government benefits. Unemployment insurance increased, reflecting an increase in pandemic unemployment compensation. There was also an increase in "other" social benefits, reflecting an increase in payments from the Provider Relief Fund to nonprofit institutions. Following government transfer payments, dividend income, and private sector wages & salaries (these wages are up 14.0% from the April bottom and sit at all-time high) led the gains.  Income from wages and salaries are a far more sustainable long-term driver for the economy than government stimulus, which is really just borrowing spending activity from the future.  Yes, it looks like more stimulus out of Washington is here and more is on the way, but the best economic tailwind for the economy comes not from our politicians, but from the near miraculous scientific achievements that now have COVID-19 vaccines being distributed across the country. So far, 48.4 million vaccines have been distributed with 26.2 million of those having been administered.  Rarely does government ever under-promise and over-deliver, but in this case President Biden's goal of 100 million vaccines in 100 days will be easily achievable. Over the past seven days almost eleven million vaccines have been administered.  It takes getting back to normal – getting back to work – to fully recover from the wounds of 2020; stimulus has and will continue to be a band-aid to tidy over until the real healing takes place.  Unlike income, spending fell 0.2% in December, and is down 2% from a year ago.  The slowdown in spending in December partially reflects the continued effects of re-introduced restrictions as COVID-19 cases rose in December.  With incomes rising faster than spending in December, the saving rate rose to 13.7%.  This is down from 33.7% back in April, but still well above "normal" levels.  On the inflation front, PCE prices grew 0.4% in December, are up 1.3% from a year ago, but up at a faster 2.4% annualized rate in the past six months.  Core prices, which exclude food and, more importantly, the very volatile energy component, rose 0.3% in December and are up 1.5% from a year ago, but have likewise accelerated of late, up 2.2% annualized over the past six months.  We expect inflation will trend higher in the months ahead, moving toward – and then above – the 2.0% year-to-year pace that historically stood as the Fed's target, though the Fed changed that target this year to allow inflation to run above trend for a prolonged period of time without pressuring them to lift the federal funds rate.  In other words, don't expect the faster pace of inflation to mean monetary policy will be tightening any time soon.  In other news this morning, pending home sales, which are contracts on existing homes, declined 0.3% in December after a 2.5% decline in November.  As a result, look for a modest decline in existing home sales for January after several months at a very rapid pace.

Click here  for PDF version

Posted on Friday, January 29, 2021 @ 12:04 PM • Post Link Share: 
Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2022 All rights reserved.