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May 30, 2017 By Peter Boockvar

Inflation, income, spending and the savings rate


United States

The Fed’s favorite inflation gauge, the PCE, rose .2% in April for both headline and core m/o/m with a 1.7% and 1.5% y/o/y gain respectively. About in line with expectations. The story remains the same within the data as durable goods deflation continued while services continued its inflationary trend higher.

Personal income was higher by .4% m/o/m as expected and within that private sector wage and salaries were higher by .8% m/o/m and 3.7% y/o/y. That y/o/y print compares with the 6 month average of 3.3% but is down from a 4.4% pace in the two prior months. Spending also grew by .4% m/o/m but off a higher than expected base as March was revised up by 3 tenths which will lead to an uptick in the next Q1 GDP revision. After two straight months of declines, spending on durable goods rebounded while spending on services continued but at a slower pace in April vs March. On a y/o/y basis, REAL spending was higher by 2.6%. The savings rate held steady at 5.3% for a 3rd straight month and which is pretty much in line with the 25 year average of 5.4%.

Bottom line, relative to expectations the only thing noteworthy was the upward revision in March spending as spending on durable goods was less negative and service spending was more than originally stated. As for April, real spending surprised to the upside off the higher than expected March base but a savings rate that remains steady points to a consumer that is just trying to just live within their means. The income data was ok but still lack any hoped for acceleration. On inflation, it was uneventful as we enter a time frame where we are now recycling thru the rebound in energy prices.

As for the market response, there wasn’t much of any. Inflation breakevens are unchanged but the 2s/10s spread is lower by another 1 bp to 94 bps. It stood at 100 bps on election day. The dollar is getting jerked around by what Draghi said yesterday, the story that forward guidance at the next ECB meeting will be more neutral and the Fed commentary.

DXY 1 yr

Screen Shot 2017-05-30 at 7.31.41 AM

Filed Under: Latest Data

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About Peter

Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.

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Disclaimer - Peter Boockvar is an independent economist and market strategist. The Boock Report is independently produced by Peter Boockvar. Peter Boockvar is also the Chief Investment Officer of Bleakley Financial Group, LLC a Registered Investment Adviser. The Boock Report and Bleakley Financial Group, LLC are separate entities. Content contained in The Boock Report newsletters should not be construed as investment advice offered by Bleakley Financial Group, LLC or Peter Boockvar. This market commentary is for informational purposes only and is not meant to constitute a recommendation of any particular investment, security, portfolio of securities, transaction or investment strategy. The views expressed in this commentary should not be taken as advice to buy, sell or hold any security. To the extent any of the content published as part of this commentary may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. No chart, graph, or other figure provided should be used to determine which securities to buy or sell. Consult your advisor about what is best for you.

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