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Nominal personal income decreased at a nonannualized rate of 3.6 percent in January, following increases of 1.0 and 2.6 percent in November and December, respectively. The release discusses two primary reasons for January’s decline. Accelerated bonuses were paid in December in anticipation of changes in the tax structure, which inflated wage and salary disbursements, and consequently overall personal income, during that month. Additionally, the expiration of the payroll tax holiday increased contributions to government social insurance, which is subtracted from overall personal income. On a year-over-year basis, nominal personal income has increased 2.2 percent. Disposable personal income (DPI)— personal income less current taxes—decreased at a nonannualized rate of 4.0 percent during January and has increased 1.8 percent since January of 2012. However, the Bureau of Economic Analysis mentions that if those special factors are excluded, DPI likely would have increased 0.3 percent in January, compared with a similar 0.3 percent increase in December.
After controlling for price changes, “real” disposable personal income also decreased 4.0 percent, following increases of 1.2 and 2.7 percent in the prior two months, and has increased just 0.6 percent since last year. Real personal consumption expenditures increased 0.1 percent in January following a similar increase in December. This is just slightly below average monthly gains of 0.2 percent throughout 2012, and on a year-over-year basis, consumption is up 2.0 percent. During January, consumption of durable goods fell 0.8 percent, while consumption of nondurable goods and services both increased 0.3 percent. Given the large drop in DPI and modest gain in consumption, the savings rate dropped from 6.4 percent in December to 2.4 percent in January.