Personal income rises, spending goes nowhere, and inflation disappoints in April

Personal income rose while spending flatlined in April and prices rose less than expected.

The latest report on personal income and spending showed income rose 0.4% in April while personal spending was flat.

PCE, a measure of inflation, rose 0.1% over the prior month and 1.2% over the prior year on a “core” basis. The PCE deflator showed prices were flat in April compared to the prior month and rose just 0.1% over a year earlier.

Expectations were for the report to show personal income rose 0.3% in April while spending edged up 0.2%. In March, personal income was flat while spending rose 0.4%.

“Core” PCE, which excludes the more volatile cost of food and energy and is one of the Fed’s preferred inflation measures, was expected to show prices rose 0.2% over the prior month in April and 1.3% over the prior year.

The PCE deflator, which is the headline number that includes food and gas, was expected to show prices rose 0.1% over the prior month and 0.2% over the prior year.

In a note to clients following the report, economists at Capital Economics wrote, “The April income and spending figures are another reminder that even though their incomes are rising at a healthy pace, households are still reluctant to boost spending more freely.”

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