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consumer spending continued to recover in april

Posted by Joseph Trevisani on May 30, 2017 6:14:42 PM

Consumer spending rose for a second month in April after  American households had cut their real outlays for an unusual two straight months in January and February.

Nominal personal consumption expenditures (PCE)  climbed 0.4 percent on the month following the revised 0.3 percent gain in March, first reported at flat, according to the Commerce Department on Tuesday.   Expenditures had increased just 0.1 percent in January and February the weakest two months since February and March last year.  Despite the recovery in March the 0.16 percent monthly average was the weakest  quarter for consumer spending in a year.  Nominal expenditures are unadjusted for inflation. 

Real personal expenditures, adjusted for price changes,  rose 0.2 percent in April after March's revised 0.5 precent jump which was first listed at 0.3 percent.  Expenditures had declined 0.3 percent  in January and 0.1 percent in February, the first consecutive decreases in real consumer spending in eight years,  since February and March 2009. Even with the jump in March the average 0.03 percent  average consumption increase in the first quarter  was the weakest three months since the -0.07 percent average in the first quarter of 2009. 

Personal income, which includes  all of a household's  earnings, transfers and awards  jumped 0.4 percent in April doubling the March gain and making this year's start the best for households since April 2014.  The wage and salary component of personal income rose 0.7 percent in April, the strongest improvement since April 2016. 

PCE inflation rose in line with forecasts in April, 0.2 percent overall on the month and the same for the core rate. Annual inflation slipped to 1.7 percent in April from 1.8 percent the prior month. The core PCE rate, the Federal Reserve's preferred measure, fell to 1.5 percent from 1.6 percent in March.

This price guage has not been at the Fed's 2 percent target since April 2012 and it has fallen 0.3 percent in two months, from its  five year top of 1.8 percent in February of this year.  

Nonetheless the central banks is still expected to raise interest rates 0.25 percent to for the second time this year to 1.25 percent at its June 13-14th meeting. 

 

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Thomson/Reuters

Nominal PCE

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Real PCE

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Core PCE Prices

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