Announced this morning, Personal Income grew 0.3% in March, a touch more than expected. Personal Spending was flat in March, also a bit better than expected and slightly lower than last month’s increase. Real Personal Spending which accounts for inflation was also flat in March. Meanwhile, the personal savings rate as a percentage of disposable income was 5.1%, a bit higher than the previous levels.
Looking at inflation, the PCE Deflator grew 0.1% in March as expected and grew 4.2% on an annual basis. The Core PCE Deflator, which excludes food and energy prices, increased 0.3% in March, also as expected and the same as last month’s figure. Core rates grew 4.6% on an annual basis, just a bit below the revised figure last month and still well above the Federal Reserve’s target. Finally, the Employment Cost index grew 1.2% in the first quarter, slightly higher than expected and the revised figure from the previous period.
Overall, income increased in March, but spending was flat and personal savings moved marginally higher. Consumers appear to be slowing down their spending. Meanwhile, inflationary measures are still increasing month over month and core rates on an annual basis remain well above the Federal Reserve’s 2% target. The cost to employers is higher for the first quarter, but not escalating at a rapid rate. Consumer spending could continue to wane in this environment as the Fed wants to keep monetary policy tight to ensure inflation moderates further. Whether or not the labor market and economy can hold up amidst this process will be key in the coming weeks.
In all, the 10-year US Treasury yield ticks slightly lower following the report and equity futures are also lower as we head into the market open.
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