Americans splash out with abandon in January
By Alexander Bueso
Date: Friday 24 Feb 2023
(Sharecast News) - American consumers splashed out with abandon at the start of 2023.
According to the US Department of Commerce, personal incomes grew at a month-on-month clip of 0.6% in January (consensus: 1.0%).
Personal consumption expenditures meanwhile shot up by 1.8% (consensus: 1.0%).
Economists had penciled-in increases of 1.0% for both incomes and spending.
The annual rate of increase in the price deflator for personal consumption expenditures meanwhile edged higher from 5.3% to 5.4%.
At the core level, the annual rate of increase in PCE also ticked up by one tenth of a percentage point to 4.7%.
Headline and core PCE prices both rose by 0.6% on the month, versus economists' forecast for a rise of 0.4%.
"The Fed's new obsession, core PCE services ex-energy, rose 0.58%, the biggest increase since November 2021," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
"Accordingly, we can't rule out a return to 50bp, but it is not our base case; we expect the payroll, retail sales, and CPI numbers due before the FOMC meeting to assuage some of the market's fears that the economy is not responding to the Fed's tightening. It is."
Citing industry data, Shepherdson also said he was "already pretty sure" that half the huge jump in January auto sales had reversed in February, as the positive weather-induced boost faded.
His forecasts called for a 0.5% drop month-on-month in real consumption in February and a roughly flat reading for March.
He also noted the 8.7% "leap" in social security payments as a cost of living adjustments, and based on the third quarter CPI, which he said had boosted income growth.
"Wage and salary income rose strongly too, up 0.9%, thanks to the spike in payrolls and hours worked due to the warm weather. This will partially reverse in February."
-- More to follow --
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