Feb Personal Income was flat vs expectations of a gain of .1% but Jan was revised up by .2% of a pt to a gain of .3%. Because Spending rose .3%, in line with forecasts, the personal Savings Rate fell to 3.1% from 3.4% and to the lowest level since Oct ’08. While this can sustain short term economic growth, the long term health of the economy in a deleveraging world needs higher savings rates, especially with exploding public sector debt. The headline PCE price deflator was unchanged, therefore REAL income was flat with REAL spending was up .3%. The core PCE was also flat. Bottom line, the Fed will take comfort in the inflation statistics even though the energy component in particular will reverse higher in March but income growth running higher by 2% y/o/y with spending up 3.4% y/o/y can only last for so long with access to credit not what it used to be.
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