Personal Income And Spending Report Weak For February

The outlook for the consumer has buckled, at least a bit following a surprisingly weak personal income and spending report for February. Income rose a soft 0.2 percent with wages & salaries slipping 0.1 percent. But the worst news comes from the spending part of the report, up only 0.1 percent and with January revised sharply lower, now also at 0.1 percent vs an initial jump of 0.5 percent. And, in what will also push back chances for an FOMC rate hike, inflation data are on the soft with the core PCE up only 0.1 percent and the year-on-year rate unchanged at 1.7 percent. Overall prices are down 0.1 percent with the year-on-year rate at plus 1.0 percent. This report is unexpected in its weakness, weakness which is the core itself of the U.S. economy.

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The Federal Reserve's 2 percent line is centered on the core PCE price index which is expected, helped by another gain for core consumer prices, to rise a monthly 0.2 percent in February. The gain could put the year-on-year rate, at plus 1.7 percent in January, within striking distance of the Fed's target. But wages eased in the employment report for February and do not point to much strength for personal income which is expected to rise only 0.1 percent. Personal spending, despite a gain for core retail sales, isn't expected to show much life either in February, at a consensus plus 0.1 percent. A weak showing for personal spending, in contrast to a rise in the core price index, would not raise chances for an April FOMC hike.