Market Commentary

Income and Spending

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Personal Income and Spending reports for April came out this week. These reports are used in the PCE (Personal Consumption Expenditures) report which is the Federal Reserve’s favorite inflation gauge.

First, spending rose sharply for the second straight month pointing to a stronger economy. It rose .6% from a revised gain in March of .5%. Income rose .3%, the same as the month before. Using these numbers the PCE Index was unchanged at 2% which was the same as the month before.  The core rate stands at 1.8%.

This likely means that the FED will raise interest rates but they have little pressure from inflation to force their hand. They meet in June and a rate increase after that meeting is almost certain but how many after that is anybody’s guess.

 

 

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