Personal consumer expenditure (PCE) rose 0.2% in April in line with market expectations. This represented a slowing in growth from the 0.4% gain seen in March. Personal income rose 0.2%, a touch faster than market expectations, although down from the 0.4% gain in March.
On a volumes basis, spending was down slightly in April. The level of spending was essentially unchanged in April compared to the first-quarter average. Consumer spending growth should accelerate through the second and third quarters as the rebate cheques (which equate to roughly 12% of personal income) buoy income levels.
From a policy perspective, this report does not alter the landscape in any substantial way. In the near-term, we expect the Fed to remain on hold as it assesses the impact on the economy of their substantial policy actions and the sizeable fiscal stimulus package.
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