The most recent March U.S. Personal Income report was about as expected but shows little strength into Q2. The Q1 Employment Cost Index did not show any signs of getting out of hand.
March Personal Income posted +0.4%, Personal Consumption Expenditures posted +0.1%, and core PCE prices were up +0.1% for +1.6% over the year.
These data all were incorporated into the Q1 GDP report, but show monthly patterns: real PCE was weak at the start and end of Q1, and core prices edged lower into Mar. This is not a good trajectory for Q2.
The month's income surge was equaled in January but otherwise was the best since June 2015. It mainly reflected a rebound in private wages of +$26.3 billion after they posted -$8 billion in February.
All other income was up, led by income receipts at +$12.5 billion as dividends jumped from a depressed February level. But rents, nonfarm proprietors' income, and transfers gained.
Savings were $735.5 billion in March, the highest since December 2012. This pushed the saving rate to 5.4%, a high last seen in February 2015.
There is no easy explanation for why individuals stepped up saving at this point -- perhaps headlines about lower stocks and international events caused caution. If so, the U.S. economy contains the ability to increase consumption ahead.
In a separate report, the Q1 Employment Cost Index posted +0.6% as wages posted +0.7% and benefits +0.5%. Over the year the ECI is +1.9% after +2.0% in Q4, so there is no sign of acceleration in this index.
ECI for private industry is running even better at +1.8% over the year. Among occupations, compensation cost gains ran from +1.4% for sales and office workers to +2.5% for production, transportation & material moving workers.
