Personal spending was stronger than expected last month and core inflation remained stubborn, the last of this week’s top-tier data out of the US economy showed.
Traders were on edge. The advance read on Q1 GDP was accompanied by a big overshoot on the core price index. There was palpable concern about the read-through for March PCE.
In that context, you could argue Friday’s personal income and spending report could’ve been worse. The MoM core PCE print was an as-expected 0.3% — 0.31675% unrounded.
The prior two months were revised higher, but January’s print saw the larger revision and that’s ancient history in traders’ minds. And it anyway didn’t change the unrounded figure for that month.
On a 12-month basis, core price growth on the Fed’s preferred gauge was 2.8%. That was slightly warmer than expected, but after Thursday’s disconcerting overshoot on the GDP index, it’s fair to say markets will take it. Unrounded, the YoY print actually ticked lower from February’s upwardly revised figures.
I should emphasize: 0.31675% is too warm on the MoM core prints. That won’t work to restore price stability as we (arbitrarily) define it. But, again, the context for Friday’s release changed at the last minute: It was all about the overshoot on the quarterly index from the prior session, and in that regard, the figures weren’t a disaster.
As for “supercore,” the unrounded MoM gain for March was 0.392%. That’s far too warm, but it’s probably amenable to the same “it could’ve been worse” interpretation vis-à-vis the quarterly SAAR reading.
For context, January’s unrounded supercore print was 0.749%. February’s cool-down escaped intact, at 0.192%.
Meanwhile, personal spending in March was well ahead of consensus at 0.8% and 0.5% in real terms for a second straight month. Economists expected 0.6% and 0.3%, respectively.
Personal incomes rose an as-expected 0.5%. At 3.2%, the saving rate was the lowest since October of 2022. (“Why save?“)
Ultimately, Friday’s release was constructive at the margins and under the circumstances. (Caveats!)
In some sense, the March PCE prices data resuscitated the left-for-dead notion that rekindled inflation pressures were primarily a seasonal phenomenon confined to January. Remember: PCE was friendlier in February than CPI and as of Friday’s release, the same’s true for March.
All of that said, this still feels very touch and go. Every release is a nail-biter, which is to say we’re nowhere close to the kind of slow, predictable disinflation the Fed says it needs to consider rate cuts.
