For the 26th month in a row, US spending growth outpaced income growth with the latter rising just 3.7% YoY (the lowest since Oct 2017) and former rising 4.6% YoY (slightly faster than in Feb).
Which prompted a drop in the savings rate and a notable downward revision to the last two months (of notable conservatism) with Jan revised down from 3.2% to 3.0% and Feb down from 3.4% to 3.3% and now March at just 3.1%.
However, while income growth did disappoint (rising just 0.3% MoM vs 0.4% MoM expectations), wage growth was up a notable 4.4% YoY with private wages dominating government worker gains (+4.8% YoY vs +2.5% YoY).
Finally we note that Real Personal Spending rose a disappointing 0.4% MoM (versus 0.5% expectations) as The FT notes that the Fed’s favored inflation measure picked up to its strongest level in 17 months in March, further boosting the case for US policy makers to increase rates two or three more times this year after a lift last month.
The so-called core personal consumption expenditures price index, which excludes the volatile food and energy components, jumped 1.9 per cent on the year last month, according to a report from the Bureau of Economic Analysis.
The rise in consumer spending, which accounts for 70% of the economy, gives the economy some momentum at the end of an otherwise weak quarter, and provide some support for forecasts that consumption will accelerate this quarter as tax cuts and a gradual pickup in wages filter into Americans’ bank accounts and sentiment. However, as Bloomberg notes, at the same time, the income figures were slightly below forecasts, reflecting the weakest gain in wages and salaries since October.