US: Sustained strength in real personal income is a mixed blessing – Wells Fargo
Data released on Friday in the United States showed an increase in Real Personal Spending and higher inflation numbers. Analysts at Wells Fargo point out that a clean read on January income is tough. They argue that while a jump in wages is supportive of spending, it's a challenge for the Federal Reserve if it keeps the heat on inflation.
Signs of resilience beneath volatility
“Real personal spending got a lift again to start the year, and in jumping 1.1% in January, growth more than offset weakness at year-end. A blow-out January retail sales report pointed to scope for a rebound to start the year at least in terms of goods outlays.”
“We anticipate durables strength is due more to monthly volatility than a renewed interest in goods outlays by consumers.”
“The sustained strength in real personal income is a mixed blessing. While it could provide a path to the elusive soft landing by supporting consumer spending more sustainably than reduced savings or reliance on more costly credit cards; it could also point to slower declines in services inflation which could compel the Fed to go higher for longer.”
“The core PCE deflator rose 0.6% and demonstrates the road to 2% inflation will be bumpy.”
Author
Matías Salord
FXStreet
Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.
