Announced this morning, the PCE Deflator increased 0.7% in March as expected and was up 3.5% on an annual basis, which is higher than the annual increase in the previous month. The Core PCE Deflator, which excludes food and energy prices and is closely monitored by the Federal Reserve for policy decisions, increased 0.3% in March, as expected. The core rate grew 3.2% on an annual basis, which is two-tenths higher than the previous month’s figure.
In addition, Personal Income increased 0.6% in March, more than expected, rebounding from a flat level in the previous month. Personal Spending increased 0.9% in March, as expected and is three-tenths higher than the previous month’s revised increase. The personal savings rate as a percentage of disposable income was 3.6%, which remains below the level seen in the economic expansion in the previous decade.
Meanwhile, Initial Jobless Claims were 189,000 for the week ending April 25th, less than expected, and a decrease of -26,000 from the previous week. Continuing Claims were 1,785,000 for the week ending April 18th, also less than expected, and a decrease of -23,000 from the previous week’s revised figure. Finally, GDP for the first quarter of 2026 was annualized at 2.0%, a bit lower than the 2.3% expected.
Overall, inflation remains elevated as the headline and core PCE deflators increased as expected in March, and annual increases are above 3.0%. High oil prices due to the lingering conflict between the US and Iran are not helping this dynamic. In March, personal income increased more than expected but was still less than the growth in personal spending, yielding a muted savings rate. With initial claims coming in below 200,000 and continuing claims at a lower level than the previous week, these real-time measures denote labor market stability; however, some workers may be supplementing income with “gig economy” jobs. With elevated inflation, consumers reducing their savings, and an apparently steady labor market, the timing and details surrounding the end of the conflict with Iran and quarterly earnings results will be key factors for the markets in the coming weeks.
In all, the yield on the 10-year US Treasury ticks slightly higher following the report and equity futures are higher as we head into the market open.
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