U.S. Personal Spending Strengthens; Core Price Gain Moderates

Personal consumption expenditures (PCE) rose 0.8% (4.9% y/y) during February after rising an unrevised 0.2% in January. A 0.5% increase had been expected in the Action Economics Forecast Survey. Adjusted for price changes, PCE rose 0.4% last month (2.4% y/y) after a 0.2% January decline, revised from -0.1%.

Real spending on durable goods rebounded 1.2% last month (1.6% y/y) after falling 2.7% in January. Real spending on motor vehicles surged 3.8% (-4.5% y/y) after a 5.0% decline. Real home furnishings & appliance outlays improved 0.4% (2.2% y/y) after falling 0.9% in January while real spending on recreational goods & vehicles declined 1.1% (+6.5% y/y) after weakening 2.6% in January. Real spending on nondurable goods fell 0.6% last month (+0.8% y/y) after falling 0.5% in January. Real clothing and footwear purchases were off 1.5% (+0.6% y/y) following a 0.6% rise. Real food & beverage buying eased 0.2% (-0.1% y/y), the third consecutive monthly decline. Real spending on services increased 0.6% (3.0% y/y) following two consecutive 0.3% gains. Real spending on transportation services surged 2.6% (5.3% y/y) in February after rising 0.3% in January. Real spending on food services & accommodations improved 0.4% (2.9% y/y) after declining 1.0% in January, but real spending on financial services & insurance rose 1.1% last month (4.6% y/y), about the same as in each of the prior three months. Real spending on housing & utilities held steady (+1.6% y/y) after rising 0.5% in the prior month while real healthcare spending rose 0.3% (4.2% y/y), as it did in January.

Personal income rose 0.3% (4.6% y/y) in February following a 1.0% January surge. A 0.4% increase had been expected. A 0.8% rise (5.8% y/y) in wages & salaries came after a 0.3% January increase. Rental income jumped 1.6% (8.0% y/y) following a 1.4% increase and proprietors’ income rose 0.6% (3.5% y/y) after a 0.1% slip during January. Income from assets fell 2.1% (+2.9% y/y) after a 1.8% rise and current transfer receipts rose 0.6% (3.1% y/y) after surging 2.8% in January. Government social benefits strengthened 1.0% (3.0% y/y) after surging 2.5% in January.

Disposable personal income increased 0.2% (4.1% y/y) in February following a 0.4% January rise. After adjusting for price changes, disposable income eased 0.1% (+1.7% y/y) last month after holding steady in January. It was the weakest m/m reading in five months.

As spending growth outpaced the gain in disposable income, the personal saving rate fell to 3.6% from an upwardly revised 4.1% in January. The rate was down from a May 2023 high of 5.3%. Personal saving declined 11.8% (-19.5% y/y) after rising 5.4% in January.

The PCE chain price index rose 0.3% (2.5% y/y) in February after increasing 0.4% in January, revised from 0.3%. These increases were up from minimal change during the prior three months. The index excluding food and energy rose 0.3% (2.8% y/y) after a 0.5% January increase, revised from 0.4%. Goods prices rose 0.5% last month (-0.2% y/y) following four straight monthly declines. Services prices rose 0.3% (3.8% y/y) following a 0.6% increase. Services prices excluding energy & healthcare increased 0.3% (4.2% y/y) after rising 0.6% in January. Food prices edged 0.1% higher (1.3% y/y) last month after rising 0.5% in January, while energy prices increased 2.3% (-2.3% y/y) after falling in each of the prior four months.

The personal income and consumption figures are available in Haver’s USECON database with detail in the USNA database. The Action Economics forecasts are in AS1REPNA.

There’s Still No Rush from Fed governor Christopher J. Waller is available here.