US consumer spending jumps 0.9% in March

US consumer spending surges 0.9% in March

US consumer spending surges 0.9% in March

USA consumer spending surged 0.9% in March, the biggest gainer in about 10 years, as inflation pressures remain non-existent. Data released by the Commerce Department on Monday reveals that the consumer spending was most impacted by increased buying in motor vehicles. Consumer spending accounts for over 70% of economic activity.

Fed officials are scheduled to meet on Tuesday and Wednesday to assess the economy and deliberate on the future course of monetary policy. Markets, however, expect no change in the rate hikes after the March meeting when Fed officially confirmed a halt in policy tightening measures.

Biggest monthly gain since August 2009...

The economy-at-large grew at a 3.2 percent annual rate in the first quarter of 2019, cheered on by the Trump administration. This so-called real consumer spending was unchanged in February. The overall economy grew at a 3.2 percent rate last quarter. Longer term projections point to the core gauge firming this year, to a 2 percent pace in the fourth quarter, the same as the median estimate by Fed policy makers in March. Spending on goods fell 0.5 percent in February.

The 1.5 percent year-over-year increase in consumer prices was up from a 1.3 percent 12-month gain in February but still well below the Fed's target.

Personal incomes also rose last month by $11.2 billion, a 0.1% increase from last month.

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The below-forecast price data Monday showed inflation still below the Fed's 2 percent goal despite low unemployment and what most economists see as above-average growth.

The core PCE index is the Fed's preferred inflation measure.

"These below-target rates of inflation will likely be acknowledged by the Fed at this week's meeting, but we still think it unlikely that the Fed would be prompted into rate cuts by weak inflation readings alone", said Jesse Edgerton, an economist at JPMorgan in NY.

At the same time, incomes rose a modest 0.1 percent in March, well below expectations, with disposable incomes flat, driving down the savings rate. Incomes have been nearly flat since surging last December.

"The labor market indicators improved, capital spending plans held steady, and the outlook for expansion and real sales gained ground as did reports of rising earnings", reported the National Federation of Independent Business (NFIB), which creates the optimism index based on surveys of its members (pdf). Wages rose 0.4 percent in March after advancing 0.3 percent in the prior month.

Americans reached deeper into their pockets in March, spending almost $1.2 trillion on consumer goods and services.

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