Very Good Report On Income, Spending, And Inflation

2025-04-30 12:45:00 ET

Summary

• Personal income rose by 0.7 percent in March, while personal consumption expenditures climbed by 0.5 percent.
• What will happen going forward? It depends highly upon tariffs: how much will prices rise and will it be only a one-time increase, and will tariffs create shortages of goods to purchase?
• Slower consumer spending could move the Fed to ease policy as early as the June FOMC meeting, but higher inflation will offset that to some extent – and perhaps even result in the Fed tightening monetary policy.

By David W. Berson, Ph.D.

Personal income rose by 0.7 percent in March, while personal consumption expenditures (PCE) climbed by 0.5 percent (helped by a surge in auto sales pre-tariff but hurt by a drop in energy prices) – very solid results suggesting good momentum heading into the second quarter (and tariffs). But perhaps even better news was that the PCE price index was unchanged for the month, as was the core PCE. The 12-month trend rate fell to 2.3 percent for the overall PCE and 2.6 percent for the core. While both of these inflation measure remain above the Fed’s long-term goal of 2.0 percent, they are close. (Note that better measures of underlying inflation (median and trimmed-mean PCE) will be released later today by regional Federal Reserve banks.)...

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