US: Data suggests greater momentum behind consumer spending - Wells Fargo

Analysts from Wells Fargo, point out that today’s personal income showed a stronger reading while real spending activity picked up. 

Key Quotes: 

“Personal income rose 0.4 percent in April following a 0.2 percent print in March. Personal income growth is now up 3.6 percent since this time last year. Wage and salary income rose a robust 0.7 percent after posting a flat reading in March (…) It is the continual increase in real disposable income that underpins our expectation for more robust consumer spending growth in the second quarter of this year.”

“Nominal consumer spending rose 0.4 percent in April following an upwardly revised March reading. Durable goods spending rose 0.7 percent month-over-month while nondurable goods spending climbed 0.6 percent. The most influential category of consumer spending, services, rose 0.3 percent for the month.”

“The Fed's preferred measure of inflation, the PCE deflator, climbed higher in April, rising 0.2 percent, after sliding 0.2 percent in March. The headline reading now stands at 1.7 percent on a year-over-year basis. Part of the stronger headline reading was due to a rebound in energy prices in April and somewhat higher food prices.”

“In our view, the FOMC wants to make sure they act ahead of realized inflation pressures. Given the lagged effect of monetary policy, we believe that there is enough evidence that demand pull inflation should resume in the second half of the year. Thus, we are maintaining our view for the FOMC to hike rates again in June and September and announce some form of balance sheet normalization in December.”