U.S. Personal Income Flat While Core PCE Rose +5.2% in January, largest increase since April 1983

US Personal income was flat month-over-month in January as rising prices increased at their fastest rate in 40 years. Rising energy prices continue to be a key factor driving inflation and global oil prices have been moving steadily higher in recent days following Russia’s invasion of Ukraine, which could disrupt supply. The core PCE price index gained 5.2% annually, the largest increase since April 1983.

US Miss

The PCE price index is closely watched since it is the preferred inflation measure of the Federal Reserve, which has signaled plans to begin raising interest rates next month for the first time since the pandemic began to tamp down rising prices.

The market seems to go through phases of trading on the premise that the US is at or close to, peak inflation. The shock will come if better inflation news in coming months is not coming. The reality is Energy prices surged nearly 26 percent compared to January 2020, pushing the price index up 6.1 percent in the latest 12 months, the fastest pace since February 1982, the report said. Excluding volatile food and energy prices, the index gained 5.2 percent.

The end of the monthly Child Tax Credit payments provided to American families during the pandemic was expected to result in lower personal income in January, but instead incomes rose $9 billion, or less than 0.1 percent, the Commerce Department reported.

  • Wages and salaries rose 0.5% month-over-month.
  • Personal current transfer receipts down 1.3%.
  • Real disposable personal income down 9.9% year-over-year while real personal spending was up 5.4%.

Highlights

  • Personal spending +2.1% vs +1.5% expected.
United States Personal Spending

  • Personal income 0.0% vs -0.3% expected
United States Personal Income

  • The PCE Price Index was up PCE price index +0.6% m/m vs +0.4% prior
  • The PCE price index +6.1% y/y vs +5.8% prior
  • The annual rate was the fastest since July 2008, reflecting increases in both goods and services.
United States Personal Consumption Expenditure Price Index

  • The Core-PCE Price Index, which excludes food and energy, rose m/m +0.5% vs +0.5% expected Prior core m/m +0.4%
  • Core PCE +5.2% y/y vs +5.1% expected, Prior was +4.9% y/y
United States Core Personal Consumption Expenditure Price Index

  • Personal spending +2.1% vs +1.5% expected.
United States Consumer Spending

  • The personal savings rate as a percentage of disposable personal income
United States Personal Savings Rate

 Source: US Bureau of Economics

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