U.S. Personal Income and Spending were Largely as Expeted in April
- Personal income rose 0.2% M/M in April following a 0.4% gain in March.
- Spending rose in line with expectations with a 0.2% gain in April.
- The core PCE deflator posted a 0.1% M/M gain following a 0.2% gain in March.
The U.S. personal income and spending data was basically in line with expectations in April. Personal income was up 0.2% M/M, after rising 0.4% M/M in March. This is not particularly surprising since there was a 0.9% fall in hours worked and the smallest monthly increase in average hourly earnings since May 2006. Personal spending, which is what the market will focus on, was up 0.2% M/M, and was exactly in line with expectations and follows a 0.4% gain in March. The 3-month annualized pace of spending was 3.2% in April, which is well off of March’s 4.5% rate. The rise in the nominal rate of spending was undoubtedly impacted by higher food and energy prices.
In real terms, personal consumption expenditures were flat in April, following a 0.1% M/M gain in March. Real expenditures on durable goods were down 0.2% M/M in April, following a 1.3% slide in March, while spending on non-durables were also soft with a 0.2% M/M decline in April. Durable goods spending was no doubt impacted by the slump in auto sales.
The core PCE deflator, which is the Fed’s preferred measure of inflation was up a modest 0.1% M/M in April, following a 0.2% gain in March. On an annual basis, the PCE deflator was 3.2%, which is unchanged from March, while the core PCE deflator was also unchanged from March at 2.1%. On a 3-month annualized trend inflation was 1.8% in April, as compared to 2.0% in March, while on a 6-month annualized trend, inflation was 2.0% in April, compared to 2.2% in March.
The take away from this report is that the U.S. consumer continues to fight valiantly against the headwinds of a slowing job market, continued weakness in the housing market, and high energy prices. Spending has not imploded, though in real terms it was flat. But all in all, this is probably because of consumers’ anticipating their federal rebate checks. This temporary effect could play a role in the coming months. At the same time, the inflation trends, which were running pretty hot earlier in the year, are now showing some signs of containment. This should come as a bit of good news to the hawks on the FOMC who are still fairly vocal about inflation risk as a policy concern. As such, with spending generally holding up, however meagrely, and inflation risk cooling, the Fed seems well positioned to hold fire on further rate cuts for the time being.
FOREX is a serious game. Play it with the pros.Forex trading involves substantial risk of loss, and may not be suitable for everyone.
Easy-Forex? Others offer promises. WE deliver.
Forex trading involves substantial risk of loss, and may not be suitable for everyone.
Forex online. Without it, you are wasting your time (and money).
Forex trading involves substantial risk of loss, and may not be suitable for everyone.
Control your destiny.
Forex trading involves substantial risk of loss, and may not be suitable for everyone.
TD Bank Financial Group
The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.
