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Personal Income:  Rebounded in April as Core PCE Steady

May 30, 2017

Bottom Line: Personal income rebounded modestly in April, mostly as expected. Wages and salaries grew 0.7% in April, the fastest pace in a year and 5.7% annualized over the last three months. As we saw in the second revision of 1st Quarter GDP, March consumer spending was revised higher. Stiil, real consumer spending rose 1.7% from Q4 to Q1 -- this quarter (with only April available so far) started at only 2.2% annualized, indicating consumers are still spending cautiously. Finally, core PCE, the Fed's preferred inflation metric, is now just 1.5% over the last 12 months, 20bps below the pace of 2016. Overall, consumer spending remains tepid with modest improvement in consumers' balance sheets and modest inflation pressures.

Personal Income ROSE by 0.4% in April, compared with market expectations for an increase of 0.4%. The prior month was revised lower from 0.2% to 0.2%. Personal Income is now 3.6% ABOVE its year ago level.

Wages and Salaries ROSE by 0.7%, Wages are now 3.7% ABOVE year ago levels. Personal Tax Payments ROSE by 0.1% and are now 3.1% ABOVE their year ago level, reflecting the year-on-year changes in employment and income.
Disposable Income ROSE by 0.4% and is now 3.7% ABOVE its year ago level.

Consumer Spending ROSE by 0.4%, compared with market expectations of an increase of 0.4% The prior month was revised higher. There were modest increases in durable goods, modest increases in nondurable goods spending and small increases in services spending. Spending is now 4.3% ABOVE its year ago level.

The Saving Rate was UNCHANGED at 5.3%.

The PCE Price Index ROSE by 0.2% and is now 1.7% ABOVE its year ago level. Meanwhile, the Core PCE Index ROSE by 0.2% and is now 1.5% ABOVE its year ago level.

Real Consumer Spending ROSE by 0.2% and is now 2.6% ABOVE its year ago level. The April level is 2.2% annualized above its Q1 level.

Article by Contingent Macro Advisors