Personal income and spending rise more than expected

Personal income and spending rose more than expected in February.

The release from the Commerce Department Monday showed that they both increased 0.5%.

Economists had forecast that they rose 0.1%. They were revised lower for January, from 0.5% for both to 0.1% and 0% respectively.

The release also included personal consumption expenditures (PCE), a gauge of individual spending and Federal Reserve chair Janet Yellen’s preferred way to track inflation.

Core PCE, which excludes volatile food and energy costs, rose 0.1% month-on-month, and 1.7% year-over-year.

Core PCE was expected to rise 0.2% month-on-month, and 1.8% year-over-year. The Fed has a 2% inflation target.

The PCE deflator, which measures the average change in prices of all domestically consumed items, fell 0.1% in February. Compared to the prior year, it was up 1%. Both matched forecasts.

“All in all, this report revealed a higher savings rate (5.4%), less consumption, and weaker pricing than we and consensus were looking for,” wrote BNP Paribas’ Laura Rosner in a client note. “After a weak Q4, the lack of momentum in domestic spending should raise questions for policymakers and supports our forecast for the Fed to do nothing in April and June.”

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