Personal Income, Consumer Spending Signal Weak Q1 Growth

Amid the biggest drop in consumer spending since 2009, personal incomes in the U.S. declined for the first time in over three years. The moves began the early part of the first quarter by placing the economy on a path of weak growth, Reuters reported.

AllianceBernstein Senior U.S. Economist Eric Winograd said, according to the news outlet, “A modest slowdown remains the most likely path for 2019.” Winograd added, “We shouldn’t expect any action from the Fed into at least the second half of the year.”

According to the Commerce Department, as cited by the report, personal income declined by 0.1 percent in January. That decrease marked the first drop since 2015. Decreases in farm proprietors’ and interest income, as well as dividends, impacted income. But government payments to farmers, as well as a VMware Inc special dividend, had bolstered incomes in December.

Consumer spending, however, declined 0.5 percent in December in the largest fall since December of 2009. (The Commerce Department didn’t publish the portion of the report for consumer spending due to the partial government shutdown.)

At the same time, factory activity notched a low of over two years in February and manufacturers noted slow hiring as well as orders. And, as government spending and the $1.5 trillion tax cut package stimulus diminishes, the economy is “losing speed,” per the outlet. The economic outlook is also facing impacts from softer worldwide growth, the unknowns surrounding Brexit, and the trade war between the United States and China.

The news comes as it was reported that the growth in the U.S. economy slowed to an annual rate of 2.6 percent during the last three months of the year with the tax cut in the rear window. Even with the slowdown compared to Q3, the results were slightly ahead of economists’ predictions. Economists were expecting the fourth-quarter gross domestic product (GDP) to grow 2.5 percent, according to the TheStreet.com. The economy grew 3.4 percent in the third quarter.