US: Personal consumption modest, manufacturing strong

5 min

Disposable personal income (DPI) gained +0.4% m/m in February while personal consumption expenditures (PCE) rose +0.2%, a combination which drove the personal savings rate up to 3.4% from the perilously low 2.4% in December. On a y/y basis, real DPI slipped to +2.1%, but we expect that to accelerate this year with rising wages, while real PCE was +2.8% for the second consecutive month, suggesting a soft Q1 GDP. Inflation as measured by the core PCE was 1.6% y/y after having been stuck at 1.5% for four straight months. Despite currently tepid income and spending, consumer sentiment as reported by the U. Mich. Survey reached a 14-year high, with the current conditions component reaching a remarkable, record (40-year) high. The ISM manufacturing index slipped from 60.8 points to a still very strong 59.3. While only one component rose this month, nine of them are still above 50, with new orders at a steep 61.9. Seventeen of 18 industries reported growth, but reports of rapidly rising prices and shortages of inputs, due in part to tariff fears, were common.