Yesterday’s income and savings data was a bit more alarming than the markets response. On Wednesday, the market cheered the GDP report that gave the impression of strong consumer spending. But yesterday’s data was much more consistent with what we’ve been seeing throughout the consumer slow-down: deflation and weak spending.
Personal income fell 0.3% after a 0.2% decline in February. Income growth was up just 0.3% year over year which is the slowest yearly climb since 1959. Consumer spending actually fell 0.2% in March – the first time it has fallen in 2009. In my opinion, you can practically guarantee a weak consumer many months going forward based on this data. With consumers saving more and making less it’s hard to imagine that we’re going to see a strong rebound in the consumer. And as I have been saying all along the difference between seeing a sharp rebound and a very sluggish rebound all hinges on the strength of the U.S. consumer. This data suggests the GDP party two days ago might have been a bit overdone.