US: Personal income in January largely reflecting the stimulus checks – Wells Fargo

During January, personal income jumped 10%. Analysts at Wells Fargo explain the number reflects stimulus checks that also boosted spending. Despite the 2.4% jump in January personal spending, they point out the faster gain in income pushed the personal saving rate higher to 20.5% in January.

Key Quotes: 

“Personal income shot up 10% in January, largely reflecting the stimulus checks that went out as part of the December relief bill. While transfer payments from the government was the largest driver of income growth, it was not the only boost.”

“In the absence of the stimulus checks, personal income would have been flat in January; personal income excluding government transfers declined 0.1% for the month.”

“Last week's January retail sales report came in way above consensus expectations, and most forecasters were not going to be caught off-guard again this week. The consensus expectation of a 2.5% month-over-month increase in personal spending would have been a full percentage point larger than any monthly gain since the re-opening after the shutdowns lifted spending figures in May & June. The actual figure was just one notch short of that sky-high expectations as spending increased 2.4%.”

“We cannot imagine a more telling indication of the pent-up demand for services than the fact that people are willing to brave the cold or take their dinner home in a paper bag.”

“Despite the 2.4% jump in January personal spending, the faster gain in income pushed the personal saving rate higher to 20.5% in January. We estimate “excess” savings, or the recent elevated levels of saving compared to personal saving rates pre-virus, currently stands at $1.7 trillion.”