Announced this morning, Personal Income grew 0.3% in February, slightly higher than expected. Personal Spending increased 0.2% in February, which was less than expected and markedly lower than the previous month. Real Personal Spending which accounts for inflation fell -0.1% in February as expected. Meanwhile, the personal savings rate as a percentage of disposable income was 4.6%, which was similar to February levels.
Looking at inflation, the PCE Deflator grew 0.3% in February as expected and grew 5.0% on an annual basis. The Core PCE Deflator, which excludes food and energy prices, increased 0.3% in February, slightly less than expected and lower than last month’s revised figure. Core rates grew 4.6% on an annual basis, still well above the Federal Reserve’s target.
Overall, income increased as expected in February, but spending was light and moderated from the previous month. Meanwhile, inflationary measures did restart their downward path on a monthly basis, but annual figures for the core rate are still well above desired targets. Given these data, the Federal Reserve likely wants to maintain restrictive policy in the coming weeks, to ensure inflation moves down even further. Whether spending, the labor market, and the economy can hold up amidst these conditions will be key for markets in the weeks ahead.
In all, the 10-year US Treasury yield ticks lower and equity futures are higher as we head into the market open. In light of the recent event in Nashville at the Covenant School, we have all the families and individuals directly and indirectly affected by this terrible tragedy in our thoughts and hearts at this difficult time.
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