Personal Income & Spending Edged Higher in April
Led by a 12.8 percent gain in rental income, personal income rose 0.2 percent in April despite a small 0.2 percent decline in wage & salaries. Spending on services more than offset the decline in goods keeping nominal personal spending positive on the month. Headline and core inflation moderated in April but remain at high levels.
Real Spending Growth Still Expanding
- On an inflation adjusted basis, spending remained flat in April after registering positive monthly readings in the first quarter. This would normally imply weak personal consumption growth in the current quarter but with about half of the $107B stimulus rebate checks now in the hands of consumers, we expect to see solid spending increases in the coming months.
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Core Inflation Remained Elevated
- The core PCE deflator remained just above the Fed’s preferred target range at 2.1 percent yr/yr. Despite the elevated reading, inflation remains a secondary concern for the Fed. As such we expect the Fed to stay on hold at the June 24-25 FOMC meeting. However, if inflation expectations continue to trend higher, the Fed will be forced to act sooner than they had expected.
Wachovia Corporation
http://www.wachovia.com
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