So should we cheer that personal consumption jumped a bit? Nope - not at all.
This from the Daily Capitalist:
February results showed that flat income growth caused consumers to tap into their savings to finance purchases of goods and services, which were up only 0.3% Month over Month (MoM). This means that personal savings decreased. These are negative indicators for the economy.
there are long-term trends in the economy and significant among those is increased savings as a result of financial uncertainty and the lack of sufficient savings by Boomers for retirement.
If savings are a main motivation of consumers, and because wages are flat to declining, then a reduction in savings to fund consumer purchases is not a good thing for the economy. It means that as soon as consumers feel they have sufficient income to continue to save, they will do so, and PCE (personal consumption expenditures) will remain flat for an extended period of time.
Look at what drove PCE in February. The largest component was purchases of non-durable goods which is food and clothing (up 0.9%). Without the component of food and fuel (which has been rising in price), PCE was flat. People need food and clothing. And they have to drive and heat their homes. These aren’t exactly elective purchases. The fact that they are dipping into savings is not healthy organic growth of PCE.
The article quotes recent numbers from a release by the Bureau of Economic Analysis along with a report by Bloomberg.
Consumers may look like they are spending a bit more, but it isn't because they are making more money or because they are reacting to some pent up demand. People are buying what they need and they are using money that they may have tucked away for a rainy day. That doesn't bode well at all.
And in a related story: This from Zerohedge.com How the Census will skew unemployment numbers.