Market Overview

Personal Income Rises Less than Expected; Spending Highest in 7 Months

Personal Income calculates the pre-tax income households collect from employment, investments, and other payments. The impact on equity markets is subdued. However, the data is still functional in gauging the ability of consumers to spend residual income, as increasing Personal Income allows for buoyant consumers spending. Also, as consumers make up two-thirds of US GDP, increasing consumer incomes theoretically should drive strong growth in the US economy.
personalincomespending.jpg
Personal income increased $28.2 billion, or 0.2 percent; however lower than an expected increase of 0.4 percent.

Disposable personal income increased $18.9 billion, or 0.2 percent, in February, according to the Bureau of Economic Analysis.

Real disposable income decreased 0.1 percent in February, compared with a decrease of 0.2 percent in January. Real PCE increased 0.5 percent, compared with an increase of 0.2 percent.

Personal consumption expenditures increased $86.0 billion, or 0.8 percent, higher than an expected increase of 0.6 percent. In January, personal income increased $26.5 billion, or 0.2 percent, DPI increased $5.0 billion, or less than 0.1percent, and PCE increased $40.9 billion, or 0.4 percent, based on revised estimates.


ACTION ITEMS:

Bullish:
Traders who believe that Personal Income is a leading indicator for the US economy, you might want to consider the following trades:
  • If Personal Income surprises to the upside, long general retail companies like JC Pennny (NYSE: JCP) because as more people have increasing incomes, the more likely people will spend it. In theory, the economy will likely grow stronger, as consumer spending is two-thirds of US GDP.
  • Also, long Consumer Discretionary companies like Target (NYSE: TGT) or the Consumer Discretionary ETF (NYSE: XLY)
Bearish:
Traders who believe that Personal Income is not a leading indicator for the US economy, you might want to consider the following trades:
  • If the data is showing mixed signals, long Consumer Staple companies like Procter & Gamble (NYSE: PG) and Colgate (NYSE: CL) because even if people have less money, they still need to buy staple products like shampoo and toothpaste.
  • Also, short big-ticket appliance makers like Whirlpool (NYSE: WHR) if Personal Income worse-than-expected.
Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

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