U.S. spending rises above expectations in March, personal income comes in below expectations

U.S. personal income and spending data released today was a mixed bag. Spending came in above expectations while income and inflation came in below expectations. Spending surged in the month of March, rising 0.9 percent sequentially, as compared with expectations of 0.7 percent. This was the most rapid rise in spending since August 2009. The figures for February were also released today and indicated that outlays were flat on the month.

In real terms, PCE also came in solid, rising 0.7 percent in March. Spending on goods, especially durable goods, drove the rise. Non-durables also recorded a rise in the last month.

Meanwhile, personal income rose 0.1 percent sequentially, as compared with market expectations of a rise of 0.4 percent. Consistent with the rise in consumption, the personal saving rate fell to 6.5 percent in March from 7.3 percent in February.

Price pressures eased throughout the first quarter of this year. Core PCE inflation eased to 1.6 percent year-on-year in March from January’s 1.8 percent. Total inflation accelerated marginally to 1.5 percent from 1.4 percent.

Following a deceleration in the prior quarter, consumption rose in March, shaking off lingering effects of the government shutdown. This augurs well for consumer spending in the second quarter, which is tracking between 2.5 percent to 3 percent annualized, as the consumer wakes up from winter hibernation, noted TD Economics in a research report.

“Looking ahead, slower income growth is expected to hold consumer spending to 2-2.5 percent in the second half of the year. Even with stronger consumption growth, inflationary pressures have been weak suggesting the Federal Reserve will likely follow-through on their hands-off approach in 2019”, added TD Economics.

At 14:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was bullish at 90.9464 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex