--1Q Real Consumption Growing +3.1%, Beating the +2.8% Q4 Pace
--PCE Deflator +0.2%; Savings Rate -1.3%
--Wages & Salaries +0.5% Despite 0.2% Dip in Mfg Wages

By Joseph Plocek

WASHINGTON (MktNews) - The key factor in the U.S. February personal income report was not that income rose 0.4% and consumption was up 0.3% in the current month, but that an upward adjustment to real January spending will assure that consumption comes in strong for 1Q.
The February data were broadly about as expected by private forecasters. However, there was a huge $24 billion upward revision to real January Personal Consumption Expenditures, reflecting upward revisions to retail sales source data. This will boost consumption in the GDP accounts. Incorporating the revision, PCE is growing +3.1% SAAR in 1Q, above the +2.8% pace of real consumption in 4Q.
The acceleration suggests the U.S. economy is doing better. February spending would have been higher if not for a 1.0% drop in real spending on nondurables. Lower natural gas and gasoline prices might have been partly resonsible, though consumers also could have cut back on nonessentials.
Real spending on durables was up 2.0% in February in a second strong gain.
February income included a large 0.5% rise in wages & salaries. Even though manufacturing wages fell, distributive and services wages were up, and federal pay raises added $1.4 billion to government payrolls.
The national savings rate was -1.3%, a fifth negative month, showing that consumers are spending prior savings.