Bureau of Economic Analysis' Personal Income and Outlays: Inflation Ticks Up

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On Thursday, March 29th, the Bureau of Economic Analysis (BEA) released the monthly readings of personal income and outlays for the month of February 2018 as well as revisions of January 2018 numbers. Raw data from the past five months is published for personal income, disposable personal income, personal consumption expenditures and PCE price index.

Readings were mostly flat in February with personal income growing 0.4 percent for the third straight month and disposable personal income growing 0.4 percent as well after an abnormal January. The BEA noted that the increase in personal income was caused by "an increase in wages and salaries," an optimistic note as wage growth over the past couple of years has been much needed. Personal consumption expenditures remained growing at a 0.2 percent pace and continued to underperform the last three months of 2017 (although that might be due to seasonality trends). With tax reform passed, eyes will be on this number to grow as consumers are expected to feel "wealthier" as tax cuts are put into effect.

Followers of the Federal Reserve and interest rates will have their eyes on the movement of the price indexes. The general PCE grew at a rate of 0.2 percent back down from a faster January which grew at a pace of 0.4 percent. The PCE excluding food and energy grew at a rate of 0.2 percent as well. More interestingly, year-over-year PCE change increased from 1.7 percent to 1.8 percent, a small sign that inflationary pressures are increasing towards the inflation target of 2.0 percent. 

The Federal Reserve considered these figures when the FOMC voted unanimously to raise the target range of the federal funds rate from 1.25-1.50 percent to 1.50-1.75 percent. In the press release, the FOMC noted that "both overall inflation and inflation for items other than food and energy have continued to run below 2 percent. Market-based measures of inflation compensation have increased in recent months but remain low." The press release also acknowledged that household spending, represented by personal consumption expenditures, had "moderated" from the fourth quarter of 2017. These statements reveal a bit of caution in the actions of the Fed but do not discount the path for rate hikes that has already been planned out. 



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