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Personal Income: PCE over 2% in Feb

March 31, 2017
Bottom Line: Bottom Line: Personal income and disposable income rose modestly in February. Real consumer spending rose 3.5% from Q3 to Q4 -- this quarter (with only January and February available so far) looks to be growing at only 0.4% annualized, indicating consumers are still spending cautiously. Consumer inflation, meanwhile, accelerated modestly. The personal consumption expenditure index is up 3% annualized in the last 3 months, compared with a 1.6% increase for all of 2016. That index is heavily impacted by base effects from low oil prices in February of last year. The Core PCE Index is up 2.5% in the last 3-months and 1.8% over the last 12 months, compared to 1.7% for all of 2016, leaving the Fed's preferred inflation metric close to but still below their 2% target.

Personal Income ROSE by 0.4% in February, in-line with market expectations for an increase of 0.4%. The prior month was revised higher from 0.4% to 0.5%. Personal Income is now 4.6% ABOVE its year ago level.

Wages and Salaries ROSE by 0.5%, Wages are now 5.5% ABOVE year ago levels. Personal Tax Payments ROSE by 0.6% and are now 5.5% ABOVE their year ago level, reflecting the year-on-year changes in employment and income.

Disposable Income ROSE by 0.3% and is now 4.4% ABOVE its year ago level.

Consumer Spending ROSE by 0.1%, compared with market expectations of an increase of 0.2% The prior month was revised lower. There were small declines in durable goods, no change in nondurable goods spending and a small increases in services spending. Spending is now 4.8% ABOVE its year ago level.

The Saving Rate ROSE by 0.2 points to 5.6%.

The PCE Price Index ROSE by 0.1% and is now 2.1% ABOVE its year ago level. Meanwhile, the Core PCE Index ROSE by 0.2% and is now 1.8% ABOVE its year ago level.

Real Consumer Spending FELL by -0.1% and is now 2.6% ABOVE its year ago level. The January/February average is 0.4% annualized above its Q4 level.