EmailThere were no surprises in the personal income and spending data in April.
Personal income increased 0.4% for the third consecutive month. That is exactly what the Briefing.com consensus predicted.
Personal spending growth slowed for the second consecutive month, increasing 0.4% in April after rising 0.5% in March and 0.8% in February. The consensus expected sales growth of 0.5%.
On the surface, these growth levels are strong and support a view of a strengthening consumer. However, the nominal data masks a second consecutive month of stronger-than-normal headline inflation growth. After adjusting for inflation, real personal consumption expenditures increased only 0.1% in April, the same rate as March.
Even more concerning, real goods purchases were flat. This corresponds exactly with the disappointing April retail sales report. While sales growth remained on a positive trend, all of the growth came from sectors affected by high inflation -- gasoline stations and grocery stores. Excluding these sectors, retail sales were flat.
Unfortunately, the growth in these sectors was not the result of an increase in demand but was due solely to higher prices. As a result, both real retail spending and real goods purchases were flat.
The only sector that grew on a real basis was services, but growth in that sector slowed from 0.4% in March to 0.1% in April.
Core PCE prices increased 0.2% in April, the same rate as April CPI and exactly what the consensus expected. Year-over-year core PCE growth inched up from 0.9% in March to 1.0% in April. This is still well below the Fed target range of 1.5% - 2.0% and in no way breaks away from the Fed's easy monetary policy.
