Personal Income Expands and Construction Spending Rises

Personal income increased 0.3 percent in January compared with December. Construction spending edged up by 0.1 percent in January as well. Wall Street took a dive on Monday, with investors apparently nervous about the situation in Crimea.

The Bureau of Economic Analysis reported on Monday that U.S. personal income increased an aggregate of $43.9 billion, or 0.3 percent, in January compared with December. Simultaneously in January, according to BEA, personal consumption expenditures – consumers out spending — increased $48.1 billion, or 0.4 percent, though much of the increase was because energy consumption and prices have risen during this year’s bitter winter.

The BEA also noted that several special factors drove most of the increase in personal income in January. For example, some parts of the Affordable Care Act, which goosed government social benefit payments upward to some individuals. boosted overall income. Also, personal income increase because of cost-of-living adjustments to several federal transfer programs and by pay raises for civilian and military personnel.

By contrast, the expiration of Emergency Unemployment Compensation programs reduced personal income in January; lump-sum Social Security benefit payments that had boosted December personal income represented a drop in January, since they weren’t repeated. Exclude all of these special factors and U.S. personal income increased $23.7 billion, or 0.2 percent, in January, compared to a decrease of $15.1 billion, or 0.1 percent, in December, the BEA noted.

Construction Spending Rises Slightly in January 

The Census Bureau reported on Monday that U.S. construction spending edged up by 0.1 percent in January 2014 compared with December 2013, defying the nation’s hard weather. Total construction spending was at an annualized rate of $943.1 billion during the first month of the year, compared with $941.9 billion the month before. The January figure is also 9.3 percent above the January 2013 rate of $863.1 billion.

Spending on private construction was at an annualized rate of $670.8 billion in January, or 0.5 percent above the December rate. Residential construction was up 1.1 percent, driving all of the increase in private spending, because nonresidential construction dropped 0.2 percent month over month in January.

Public spending was also a drag on overall construction spending, particular as federal spending dropped. In January, public agencies spent at an annualized $272.3 billion on construction projects, or 0.8 percent less than in December. In real terms, public construction spending has contracted to roughly 2001 levels.

Stocks Drop Due to International Jitters 

Wall Street took a dive on Monday, with investors apparently nervous about the situation in the Crimea. The Dow Jones Industrial Average lost 153.68 points, or 0.94 percent, while the S&P 500 dropped 0.74 percent and the Nasdaq declined 0.72 percent.

Simultaneously, worries about a “new cold war” – the term is already being bandied about – inspired sales of stock in Russian companies, most notable Gazprom, the country’s natural gas monopoly, which dropped 12 percent (the company controls a number of pipelines in the Ukraine). The ruble fell to an all-time low against the dollar on Monday, despite the Russian Federation’s $500 billion horde of dollars.

Worldwide, investors did what they usually do in times of international jitters, namely buy U.S. government debt, and commodities such as gold and crude oil. A barrel of Brent crude was up more than $2 on Monday to $111.41. U.S. wheat prices also spiked on Monday, because black-soiled Ukraine is a major world producer of that cereal.