Announced this morning, Personal Income increased 0.5% in March, slightly higher than expected. Personal Spending increased 1.1% in March, also higher than expected and notably stronger than the previous month’s revised figure. In addition, the Employment Cost Index, a measure of the changes in employee compensation costs, rose 1.4% in the first quarter which is the highest level going back to the mid 1990’s. Meanwhile, the PCE Deflator remains elevated increasing 6.6% on an annual basis, slightly less than expected. The Core PCE Deflator, which excludes food and energy prices, grew 5.2% on an annual basis also slightly less than expected. Overall, a slight increase in income and a larger increase in spending during the month, highlighting that consumer spending was a positive contributor to GDP in the first quarter despite yesterday’s negative first reading of the headline number. As employment costs are elevated in a tight labor market, annual inflation measures while still high were slightly less than expected. Inflation movements and the path of the Fed’s policy tightening will be key in the months ahead for both consumers and business spending. In all, the 10-year US Treasury yield ticks higher and equity futures are lower as we head into the market open.
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