Personal Income And Spending Rises

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.