United States personal incomes grow more slowly than expected in February



A key measure of U.S. inflation rose 1.8 per cent in January compared to a year earlier, its slowest rate of growth since February 2018, figures released today showed.

The cost for energy goods and services fell 6.4 per cent at the start of the year, compared to January 2018, dragging the Federal Reserve's preferred inflation index down to 1.4 per cent year-over-year, four tenths lower than the December rate.

Gross domestic product forecasts for the first quarter are as low as a 0.9 percent annualized rate.

In the 12 month through January, the PCE price index rose 1.4 percent, the smallest rise since September 2016 after increasing 1.8 percent in December.

The next report on April 29 will combine personal spending and PCE price data for February and March with income figures for March, according to the Commerce Department.

Continued tame price pressures and increasing signs the USA economy has peaked, at a time of slowing global growth, have prompted the Fed to pledge to hold off on further interest rate increases for the foreseeable future. The release of the January consumer spending figures was delayed by a five-week partial shutdown of the federal government that ended on Jan. 25.

The BEA reported that the USA personal income rose 0.2 percent in February, while personal spending rose 0.1 percent.

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When adjusted for inflation, consumer spending gained 0.1 percent in January after dropping 0.6 percent in December.

The personal savings rate, as a percent of income, was 7.5 percent. A comparatively high saving rate implies considerable scope for spending to bounce back in the coming months.

Americans' incomes barely budged last month, while the overall US economic growth shows signs of slowing.

A report March 28 showed the expansion decelerated to a 2.2% pace in the fourth quarter, and economists surveyed by Bloomberg project 1.5% this quarter, the slowest in two years.

In real terms, spending rose 0.1 percent to one decimal place.

The slower-than-forecast core inflation gives Fed officials time to wait for signs of a pickup before considering resuming their hikes.

"The increase in personal income in February primarily reflected increases in wages and salaries, government social benefits to persons, and proprietors' income", the department said.

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