Income isn't quite as soft and spending isn't quite as strong as they
look while inflation readings are modest and steady. Income rose 0.3
percent in April but the wages & salaries component shows a solid
0.4 percent gain. Spending jumped 0.6 percent in the month led, however,
by a 0.9 percent gain for nondurables which reflects April's rise in
gas prices.
Both the overall PCE price index and the core rose
0.2 percent in the month, the latter edging above Econoday's consensus
by 1 tenth, with the year-on-year rates hitting expectations, at 2.0
percent overall and 1.8 percent for the core.
Of note for the
core is a revision to March's year-on-year rate which has been
downgraded to 1.8 percent. Also of note is a 2 tenths dip in the savings
rate to an even lower 2.8 percent which suggests April's spending, to a
degree, was funded at the expense of savings.
Yet gas-driven or
not, the rise in spending marks a strong opening for second-quarter
consumer spending and, together with yesterday's big improvement in
April goods trade, are both early indications of strength for
second-quarter GDP. More fundamentally, concerns in yesterday's Beige
Book that consumer spending was moderating look perhaps unwarranted and
that steady growth, backed by respectable income, is now the more
accurate description. For inflation, no alarms in this report with room
still left to run for the core in its awaited approach to the Fed's 2
percent goal.
No comments:
Post a Comment