The BEA reported that the U.S. personal income rose 0.2 percent in February, while personal spending rose 0.1 percent. Both came in below expectations for a 0.3 percent gain on both metrics. The tepid gain in January’s spending came as income dropped 0.1 percent in the month.
Falling prices were partially responsible for the weak growth in nominal spending. On a year-on-year basis, inflation in the PCE deflator slowed to 1.4 percent in January in December. Core PCE inflation also dropped to 1.8 percent from an upwardly revised 2 percent in December.
In real terms, spending rose 0.1 percent to one decimal place. By major category, real durable goods spending dropped 1.6 percent, nondurable goods rose 0.5 percent, while services were up 0.2 percent. The personal saving rate dropped 7.5 percent in February from an upwardly revised 7.7 percent in January.
“Even with solid rebounds in February and March, real consumption growth is likely to come in between 0.5 and 1.0 percent (annualized) in the first quarter”, said TD Economics in a research report.
The income side of things shows a slightly better picture. While the rise in February was modest, the average in the last three months came sits at 4.5 percent to February. A comparatively high saving rate implies considerable scope for spending to bounce back in the coming months.
“Prospects for continued growth hinge on the continued health of the job market. A rebound in job growth in March following the soft outturn in February would go a long way to easing fears that the American economic engine is sputtering”, added TD Economics.
At 18:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was bullish at 91.2037 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex
