February U.S. personal income and spending data are out.
Personal income rose 0.3% in February, matching January’s pace of growth and the consensus forecast of market economists. Spending was also up 0.3%, in line with the consensus forecast. January spending growth was revised to 0.2% from 0.4%. The savings rate rose to 4.3% in February from 4.2% in January.
The price index of core personal consumption expenditures — the Federal Reserve’s favourite measure of inflation — rose 0.1% in February, matching January’s rise and the consensus forecast. The year-over-year change in core PCE (i.e., the annual inflation rate) was unchanged from January at 1.1%.
Core PCE is the inflation measure the Fed cites in its communications. The central bank targets a 2% rate, well above current levels.
“Overall, the underlying tone of this report was encouraging,” says Millan Mulraine, deputy head of U.S. research and strategy at TD Securities.
“Outside of the downward revision to January’s estimate on spending, which would suggest a slower contribution to GDP from consumption than previously thought, the modest pick-up in spending suggests that the our underlying constructive view on the economic outlook is beginning to take shape. We continue to expect GDP growth in the upper end of the 1.5% to 2.0% range, though the risk may have shifted slightly to the downside. Nevertheless, we continue to expect growth momentum to pick-up meaningfully in the coming months, and the encouraging tone in this report certainty points in that direction. For the Fed, the subdued tone in inflation is likely to keep concerns about the lingering inflationary thrust going, and if this persists it is likely to keep any consideration of near-term rate hikes at bay.”
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