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February personal income and spending decline

February personal income and spending decline: the back end of January stimulus payments

Last month I wrote that the:

“report on January personal income and spending shows just how important the stimulus packages enacted by the federal government both last spring and last month have been to sustaining the economy.”

The truth of that was confirmed on the back end in this morning’s report for February, in which January’s 10% increase in income was followed by a -7.1% decrease (red). January’s increase of 3.4% in spending was also partially reversed by a -1.0% decrease in February (blue):


In its release, the Census Bureau confirmed this analysis, writing:

Not quite enough to start a “double-dip” recession

Real personal spending declines in December, while income rises; not quite enough to start a “double-dip” recession

This morning’s report on personal income and spending for December reversed the pattern we have seen all during the second half of 2020. After rebounding strongly for 6 months, real personal spending (blue in the graph below) declined for the month by -0.2%, and is 3.6% below its February peak. Meanwhile real personal income (red), which has generally declined since April, rose 0.6%, and remains 1.3% higher than it was in February just before the pandemic hit:



The continued strength in income compared with prior to the pandemic has everything to do with the emergency stimulus Congress put in place early on after the pandemic hit. This has greatly ameliorated the privation which would otherwise have occurred.