US 'core' PCE accelerates in January
Personal income and spending printed ahead of forecasts at the start of the year, alongside a hefty 0.9% jump in disposable incomes as recently approved tax cuts kicked-in, according to a keenly awaited release from the Department of Commerce.
Despite that, key inflation gauges contained within the same report - including the Federal Reserve's preferred inflation index - came in just as expected, rising at the same clip as in December.
At the headline level, the year-on-year rate of gain on the price deflator for personal consumption expenditures held at 1.7%, while at the 'core' level, excluding food and energy that is, the PCE price index came in at 1.5%.
Nevertheless, and as Capital Economics pointed out, the annualised three-month rate of change in core PCE picked-up to an 11-month high of 2.1%.
Meanwhile, personal income and spending rose by 0.4% and 0.2% month-on-month, respectively, which was ahead of economists' forecasts for a reading of 0.2% for both measures.
Boosted by the White House's tax cuts, the personal savings rate was at 3.2% in January, versus 2.5% in December.
Following the release of the data, the yield on the benchmark 10-year US Treasury note was off by two basis points at 2.84%, albeit versus an intra-day low of 2.82%.
In inflation-adjusted or real terms, disposable personal incomes grew by 0.6% month-on-month.
Over the course of 2017, real disposable incomes, that is to say, after taxes, grew by 1.2% after an increase of 1.4% in the year before.
Commenting on the data, Paul Ashworth at Capital Economics said: "January’s personal income and spending data shows underlying inflation accelerating again, although real consumption growth is weakening even with the boost to incomes from the tax cuts.
"The core PCE deflator increased by a sizeable 0.3% m/m in January and, although the annual core inflation rate was unchanged at a muted 1.5%, the three-month annualised rate jumped to an 11-month high of 2.1%."
For his part, Ian Shepherdson at Pantheon Macroeconomics chipped in: " Clothing prices jumped a huge 2.4% m/m, but the emerging story here is in healthcare, where the y/y rate is now 2.0%, the highest since March 2013, and up from a post-Obamacare low of 0.5% in much of 2015.
"[...] Jan real incomes before tax were unchanged, but after tax they rose 0.6%, allowing the saving rate to jump to a five-month high of 3.2%. That's still very low, though, and we're expecting only about half the tax cuts to be spent."