US personal spending unchanged in March as price pressures ease

Personal incomes grew a tad more quickly than expected during the previous month, but spending was unchanged.

In parallel, prices eased back albeit slightly less quickly than anticipated.

According to the Department of Commerce, in seasonally adjusted terms personal incomes rose by 0.3% in March (consensus: 0.2%), while personal consumption expenditures were flat (consensus: -0.1%).

The increase in spending for February was revised down by one tenth of a percentage point to 0.1%.

Calculated as a proportion of disposable income, the personal savings rate increased from 4.8% to 5.1%.

On the inflation front, the month-on-month rate of increase for the headline PCE price deflator edged up by 0.1% pushing the year-on-year rate of increase down from 5.1% to 4.2% (consensus: 4.1%).

At the core level, PCE prices were up by 0.3% month-on-month for an annual rate of increase of 4.6% (consensus: 4.5%) against 4.7% in March.

Worth noting, the PCE price data contained in the first quarter GDP report released the day before had implied a 0.5% increase on the month at the core level.

"The key PCE number for the Fed - core services ex-housing - however, looks much better. The 0.24% March increase is the best since last July, and follows a 0.36% gain in February. This marks a clear downshift from the 0.44% average increase across the previous three months," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

"A further sustained slowing requires a meaningful downshift in wage growth, which we still think is very likely, despite the disappointing Q1 ECI numbers; see our comments below."

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