March Personal Income Gains 0.2%; Spending Rises 0.2%

WASHINGTON - The March Personal Income report contains numbers that already were incorporated into the Q1 GDP data, and thus is "old news" that should be discounted. But it shows a pattern of continuing consumption in the face of fluctuating wages that suggests households will continue to boost the economy ahead.

March Personal Income advanced +0.2% and Personal Consumption Expenditures +0.2% after February had the biggest gain since September (+1.1%).

Core PCE prices were flat for +1.1% over the year, their slowest pace since March 2011. Overall PCE prices were up 1.0%, their slowest pace since 2009 during the recession. No doubt much will be made of the fact that these indicate no inflation and give the Fed leeway to continue its easy policies. But remember that these indices are derived from CPI data, which we already knew was soft.

Income was less and spending more than expected, but all the data already were in the Q1 GDP number and the distribution should be the biggest news. Overall, real PCE was pretty steady in Q1. It posted +0.2% for January, +0.3% for February and +0.3% for March, illustrating the consumer remains a mainstay of the economy.

Private wages were up $14.9 billion in March, with slowing across categories, after +$44.6 billion in February. The Commerce Department estimated wages in all three months in Q1 were reduced by $15 billion each by accelerated bonuses. These took advantage of the lower tax rates in Q4.

Rents, transfers, supplements, and proprietors income increased.

Income on assets fell $7.3 billion in a continued seesaw after January dividends fell, February surged, and March retreated. Dividends were accelerated into Q4.

Savings were steady at $329.1 billion, for a 2.7% savings rate, the same rate as in February.

It appears the government budget sequester might be in the slowing private incomes, but their future effect on consumption remains to be seen.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.

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