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Tickers in this Article: JCP, JWN, TIF
Friday's personal income report showed a gain of 0.6% in February, which was double Wall Street's expectations. Behind the gain was an 0.4% surge in wages and salaries, with disposable income up 0.1%. However, the personal savings rate is still at - 1.2%.

Looking forward, if personal income holds in March, the annualized number would come in at a 3.4% increase for the quarter... something that would be a plus to the economy.

However, the report does not bode well of those who keep a close eye on inflation, as measured by the consumer spending deflator, which rose 0.4% in February. And, to make matters worse, prices on the whole rose 0.3%, the most blistering growth in half a year.

Looking Into the Hype
When we look into the numbers, we see that part of the gain in the personal income report came from the Bureau of Economic Analysis decision to add in an annual $50 billion to compensate for bonus payments and stock options.

You read that right, the BEA is adding in $4.16 billion a month (for each month of the first quarter) to compensate for bonuses and stock options. So, does it feel like the numbers are doctored a little?

You bet it does. I encourage you to ask around, and I'd be surprised if to many of those close to you saw their paychecks grow 0.6% in February. What we have here is good old economic over-analysis, which leads to an almost 'unreal' picture of what's really happening.

And, to make matters more complicated, February's numbers might lead us to believe that consumers are spending more money at retail stores.

Should You Buy Retail?
I have to tell you, I've visited two malls in the last three weeks, and both we completely dead. Really, what it comes down to is that retailers are not out of the woods yet, and if we were to solely watch economic reports like February's personal income, we could easily draw the wrong conclusion.

I still hold that department stores like JC Penny (NYSE: JCP) and Nordstrom's (NYSE: JWN) could be in trouble, as consumers will likely shop at lower-end stores like Target (NYSE: TGT) and Wal-Mart (NYSE: WMT). On the other end of the spectrum, the ultra-rich, those who cashed in the stock options that the BEA mentions, are probably shopping at Tiffany's (NYSE: TIF) right now.

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