Highlights
Personal income in March fell further as consumer spending retreated from recent gains. Yesterday's GDP report apparently gave a misleading picture of relatively healthy consumer spending. Meanwhile PCE inflation came in mixed. Personal income fell 0.3 percent, following a 0.2 percent dip in February. The March decrease was worse than the market forecast for a 0.2 percent decline. Within personal income, the wages and salaries component fell a sharp 0.5 percent, after dropping 0.4 percent in February. Consumer spending turned negative again with a 0.2 percent decrease after gaining 0.4 percent in February. March spending was below than the market projection for no change.

PCE inflation was mixed as the headline PCE price index was unchanged, coming off a 0.3 percent jump in February. Meanwhile, the core PCE price index posted another 0.2 percent increase in March – the same as for the prior two months – and matched market expectations.

Year on year, personal income growth fell to 0.3 percent from 1.0 percent in February. Headline PCE inflation dipped to 0.6 percent from 0.9 percent the previous month. However, core PCE inflation held steady at 1.8 percent.

The March personal income report is more pessimistic about the consumer sector than yesterday's first quarter GDP report in which spending was up for the quarter. Now, the more current personal income report shows consumers having less income to work with and a pullback in outlays at the end of the quarter. This indicates possible erosion of the consumer sector in second quarter GDP.

Today's report should be negative for equities and should ease bond yields. Another record high for continuing jobless claims should have the same impact.

Market Consensus Before Announcement
Personal income in February slipped 0.2 percent, following a 0.2 percent boost in January. But the latest drop was even worse for the wages and salaries component which fell 0.4 percent, after slipping 0.2 percent in January. This is the component that average consumers use for paying bills and making purchases. Consumer spending slowed to a 0.2 percent rise, after a 1.0 percent jump in January. But firming oil prices bumped up overall consumer inflation for a second consecutive month as the headline PCE price index jumped 0.3 percent, equaling the rise in January. Meanwhile, the core PCE price index rose 0.2 percent - the same as for January. Looking ahead, a March decline in 0.1 percent for aggregate weekly earnings (from the employment report) portends sluggish personal income for March - at least for wages & salaries.

2009 Release Schedule

Released On: 2/2 3/2 3/27 4/30 6/1 6/26 8/4 8/28 10/1 10/30 11/25 12/23 Released For: Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov