Personal spending jumped by 0.9% in March, which beat expectations for a 0.6% increase.
This was the biggest gain since August 2009.
“March’s solid rise in real spending is due to two factors,” said Capital Economics’ Paul Dales. “One, the unwinding of the weather distortion generated a 1.4% m/m leap in goods spending. Two, the surge in healthcare spending (as the previously uninsured use the new policies provided by the Affordable Care Act) led to a 0.4% m/m rise in services spending.”
“The weather-related rebound may now have run its course,” added Dales. “The rush to take out a healthcare policy before the end of March, however, means that healthcare spending could rise rapidly in April too.”
Income climbed by 0.5% in March, which was a bit stronger than the 0.4% expected.
“Most of this was also weather-related, as the rebound in employment and hours worked in March boosted nominal wages and salaries by 0.6% m/m,” said Dales. “Income was also boosted by a 1.4% m/m increase in Medicaid transfer payments due to the expanded coverage of the ACA.”
The PCE price index climbed 0.2% in March. Similarly, core PCE climbed by 0.2%. Both figures were right in line with expectations.
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