U.S. personal income rises below projections in March, personal spending rises strongly

The U.S. personal income grew below the consensus expectations in March. Personal income was up 0.2 percent, as compared with the median consensus forecast of 0.3 percent. However, it was still a better month for real income growth – curtailing for inflation and removing taxes, real disposable personal income grew strongly by 0.5 percent.

In nominal terms, personal spending was flat and came in lower than the consensus projection of 0.2 percent. In real terms, personal spending grew 0.3 percent, driven by services that rebounded 0.4 percent following two months of declines. Consumption of goods dropped slightly by 0.1 percent as gains in non-durable goods were countered by falling spending on durables.

Consumer prices dropped 0.2 percent in the month, bringing the year-on-year inflation rate to 1.8 percent, noted TD Economics. Core prices dropped 0.1 percent on a sequential basis, bringing the year-on-year rate to 1.6 percent. Meanwhile, the personal saving rate was up 5.9 percent in March from February’s 5.7 percent.

The robust growth in services spending shows a normalization in utilities consumption following two months of warm weather-induced weakness. In the meantime, the decline in durable spending gives a huge hurdle for spending growth in April and May to assuage fears that the deceleration is more than a first quarter blip. Robust real incomes gain is the saving grace. As long as job growth holds up and inflation continues to be modes, real income growth should give the push for spending growth to quicken in the coming months, stated TD Economics.