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Market Analysis
PCE Price Index Up 0.3% in Feb, in Line with Expectations
Personal Consumption Expenditures (PCE) saw a significant 0.8 percent increase, driven by growth in both the service and goods sectors.
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The U.S. Bureau of Economic Analysis reported a 0.3 percent increase in personal income for February, amounting to a $66.5 billion rise from the previous month. Disposable personal income (DPI) also saw a 0.2 percent increase, equating to a $50.3 billion uptick.
The primary drivers of the personal income growth were increases in compensation and personal current transfer receipts, which were partially offset by a decrease in personal income receipts on assets.
Personal Consumption Expenditures Increase 0.8% in February
Personal Consumption Expenditures (PCE) increased by 0.8 percent in February, to $145.5 billion, up from the previous month. The service sector accounted for a substantial portion of this growth, with spending increasing by $111.8 billion.
Financial services, insurance, transportation services, housing, and utilities were the primary contributors to this increase. Goods spending also saw a notable rise of $33.7 billion, primarily driven by increased spending on motor vehicles and parts.
Personal outlays, encompassing PCE, personal interest payments, and personal current transfer payments, grew by $149.9 billion in February. Despite this increase in spending, personal savings remained at $745.7 billion, with a personal saving rate of 3.6 percent
PCE Price Index Up 0.3% in February
The PCE price index, a measure of inflation, rose by 0.3 percent from the previous month, with goods prices increasing by 0.5 percent and services prices by 0.3 percent. The PCE price index still showed a 0.3 percent increase when excluding food and energy.
Real PCE, which adjusts for inflation, grew by 0.4 percent in February. This growth was primarily driven by a 0.6 percent increase in spending on services, with international travel, transportation services, and financial services and insurance being the main contributors.
Spending on goods saw a more modest 0.1 percent increase, largely due to increased spending on motor vehicles and parts.
How do you think the Fed will see the latest PCE data? Let us know in the comments below.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
Tim Fries
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
