US personal income rose 0.4% m/m and personal spending rose 0.1%. Wage and salary growth was solid in February, rising 0.4%, while growth in disposable income was also 0.4%. The saving rate ticked higher to 5.8%, up from 4.4% in November and the highest monthly reading since December 2012. The headline PCE index rose 0.2% m/m, while core PCE inflation was up 0.1%. This leaves headline and core PCE inflation up 0.3% y/y and 1.4% y/y, respectively. The increase in the month-on-month rate of headline inflation is the first in four months. Some of the slowdown in personal consumption growth is weather-related and we could see a partial rebound in Q2. Trends in real disposable income and a higher saving rate suggest households have positive momentum in Q1.According to Barclays Capital – “The February data on personal income and spending were modestly softer than our expectation in both nominal and real terms. We view the data as indicating that households are still receiving a boost from falling energy prices, but the main support to household spending power likely peaked in Q4 and should fade in the months ahead, as monthly rates of headline inflation remain positive.”
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