US Personal Income & Spending, Adv. Goods Trade: Quick Take - CIBC

After appearing to start the year on strong footing, it now seems like personal income and spending south of the border haven’t been all that strong after all. Both income and spending were weak in February, however revisions also wiped out just about all of the gains observed in January.

February personal income growth clocked in at 0.2%, while spending grew only 0.1% following a downwardly revised 0.1% in January (prev. +0.5%). Even the inflation showed up weaker than expected in the report. Core PCE inflation remained at 1.7% instead of ticking up to 1.8% as had been expected. The weak inflation print makes us more certain that the Fed will take a pass in April, despite some of the hawkish rhetoric from FOMC members recently. Separately, the advance goods trade balance showed a slight widening to $62.9B in February from $62.3B in January, albeit that was on the back of better two-way trade and so it wasn’t all bad news.

Overall, the weak spending and income combined with soft inflation should be positive for fixed income and negative for the US dollar.

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