skip to Main Content

First Cut: February personal income continued moderate rise, consumption was lackluster; PCE deflator nearer the Fed’s 2% objective

Personal income was up 0.6% in February from January, a second month in a row of solid gains. Income gains were mainly powered by increases of 0.5% in February and January. Upward pressure on wages were both from mandated changes to minimum wages and competition for qualified workers.

Personal consumption expenditures were up a lackluster 0.2% for a second month in a row. The increase was restrained by a 0.2% dip in spending on nondurables likely related to falling gasoline prices and a 0.5% decrease in durables spending that was probably related to softer motor vehicle sales. Spending on services was up 0.4%.

Personal income is likely suffer in the March data when those numbers are released at 8:30 ET on Thursday, April 20. On the other hand, the rush to stock up on pantry staples and emergency supplies may temporarily boost consumption in March even with continued declines in gasoline prices.

The PCE deflator was up 1.8% compared to February 2019 both at the total and excluding food and energy. This is close to the Fed’s symmetric 2% objective and a welcome development for policymakers. Or it would be if they had much attention to spare from keeping financial markets afloat and boosting confidence that the central bank was paying attention and doing everything possible to support the economy during the present crisis.

Back To Top