In this morning’s data, the PCE Deflator increased by 0.3% in January, as expected and was up 2.4% on an annual basis. The Core PCE Deflator, which excludes food and energy prices and is closely monitored by the Federal Reserve, increased 0.4% in January, also as expected, with the previous month revised lower to just a one-tenth increase. Core rates grew 2.8% on an annual basis, a slight decrease from the previous month.
Meanwhile, Personal Income grew 1.0% in January, substantially higher than expected and the previous month. Personal Spending grew 0.2% in January, as expected. Real Personal Spending, which accounts for inflation, decreased by 0.1% in January. In addition, the personal savings rate as a percentage of disposable income was 3.8%, a decrease from the 4.1% measure in December.
Finally, Jobless Claims were 215,000 for the week ending Feb 24th, slightly more than expected and the previous week. Continuing Claims were 1,905,000 for the week ending Feb 17th, also slightly more than expected and the previous week.
Overall, headline inflation data ticked higher in January for both the headline and core measures. The core rate did move slightly lower on an annual basis but remains above the Federal Reserve’s 2% goal. Meanwhile, both spending and income increased in January, although spending grew at a lower rate than the previous month. Difficult weather conditions may have had an impact. Jobless claims remaining in the low 200,000’s highlight a continued strength in the labor market. With a resilient labor market, income and spending continuing to increase, and inflation measures still above targets, the Federal Reserve will likely remain cautious about starting rate reductions until later in the year.
In all, the 10-year US Treasury yield ticks lower following the data and equity futures are higher as we head into the market open.
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