Things were good in February as income jumped more than expected while spending and inflation fell more than expected, according to monthly data from the Bureau of Economic Analysis.
- Y-O-Y: The Personal Consumption Expenditure Price Index slowed to 5.0% in February, down from 5.3% in January and the lowest level since September 2021.
- M-O-M: The price index increased 0.3% in February, down from the 0.6% increase in January.
Better Than Expected. Core PCE fell to an annual rate of 4.6% while economists thought it would hold at 4.7%.
Income. Personal income increased $72.9 billion, or 0.3%, in February, lower than January’s 0.6% increase but higher than the 0.2% economists were predicting.
- Personal savings increased to $915.8 billion in February and the personal saving rate was 4.6%, up 6% from January and the highest level since January of last year.
Spending. Personal outlays increased $40.7 billion, or 0.2%, in February, much lower than January’s 2.0% jump and lower than economist predictions of 0.3%.
This report is exactly what Powell and others at the Fed want to see. Inflation and spending are slowing while still seeing some wage growth. This is terrific news for the housing sector. Not only could it hopefully lower rates, but it will also help housing affordability. While housing affordability has increased slightly, as we discussed yesterday, lower rates and higher incomes will def help more people afford homes and keep mortgage demand moving in the right direction.