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US Consumer Spending, Inventories Rise, Income and Inflation Fall

Posted by Joseph Trevisani on Apr 30, 2015 12:20:00 PM

Personal spending rebounded in March but with income flat consumers drew on their reserves, dropping the saving rate to its lowest this year. 

Purchases rose 0.4 percent, the largest monthly gain since November following an upwardly revised 0.2 percent gain in February, reported the commerce Department in Washington, D.C. today. Economists had forecast a 0.5 percent increase. On the year personal spending rose 3.0 percent, down from 3.4 percent in February, for the smallest annul increase in a year. 

Personal income was unchanged in March after an unadjusted 0.4 percent gain in February. It was the weakest income figure in 15 months. Analysts had predicted a 0.2 percent gain. The annual increase slipped to 3.8 percent from 4.4 percent the prior month, for the lowest increase in six months. 

The saving rate on disposable income fell 0.4 percent to 5.3 percent in March, the lowest pace this year. 

The personal consumption expenditure price index (PCE), the price measure derived from the personal spending figures, rose 0.2 percent in March, the same as in February. On the year it climbed 0.3 percent. 

Excluding food and energy costs produces the 'core PCE deflator', the Fed's preferred inflation gauge. It rose 0.1 percent in March, half the forecast and the same as in February. The annual rate dropped 0.1 percent to 1.3 percent and the prior month was revised down to 1.3 percent from 1.4 percent in February. 

The personal spending figures cited above are not adjusted for price changes. The Commerce Department inflation corrected consumption numbers, which are used to calculate GDP, increased 0.3 percent last month after being unchanged in February, and initially reported as a 0.1 percent drop.

The U.S. economy stagnated from January to March, with gross domestic product rising at a 0.2 percent annual rate the worst in a year and far less than the 1.0 percent median forecast. Declines in business investment and exports, hammered by the strong dollar, and a harsh winter in half the country reduced economic activity.

Inventories expanded 3.0 percent in the first quarter.  Without that addition to production, GDP would likely have been negative. The economy grew 2.2 percent in the prior quarter.

In a separate report the Milwaukee division of the Institute for Supply Management said its purchasers manufacturing index fell to 48.08 in April, missing its 53.0 forecast and a sharp drop from March's 53.25 score.  However, the Chicago Business Barometer from MNI and Deutsche Boerse found improved business conditions in the same general geographic area, scoring 52.3 in April, better than the 50.0 estimate and March’s 46.3 issue. 

Reading below 50 in both indexes indicate contraction. 

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Bloomberg

income april 30

sopending april 30

adj spend april 30

savings april 30

 

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