–Pvt Wages +$17.8b vs +$22.1b in Jan; Core Prices +1.9% YOY

By Joseph Plocek

WASHINGTON (MNI) – The U.S. February Personal Income report was
mixed versus expectations, but rising real consumption gives good GDP
arithmetic that suggests decent growth.

February Personal Income printed below expectations at +0.2%,
but Personal Consumption Expenditures were better than expected at

Core PCE prices were up 0.1% for +1.9% over the year. PCE prices
for energy were +3.6% in February, the biggest gain since +3.7% in March

The February advance marked the biggest PCE gain since August 2009
(the pace was equaled twice in 2011, only to see retreats). Given low
inflation, real PCE printed +0.5% after +0.2% in January. This will
pretty much assure Q1 GDP real growth in the high 2%+ area.

Real PCE was up 1.6% for durables, up 0.1% for nondurables, and up
0.4% for services.

Private wages rose $17.8 billion after +$22.1 billion in January as
manufacturing wages slowed. Rising wages are the key support for

Proprietors’ income, rents, transfers and income receipts
all rose. Transfers were up only $3.0 billion on net, with the bulk of
the gain from increased Social Security payments.

Spending came at the expense of saving. The $438.7 billion savings
level was the smallest savings since October 2009, and the saving rate
was 3.7%, a low since December 2007. The latter compares to 4.3% in

A bottom line is that this pace of spending probably cannot be
maintained given the lessened savings, but even some slowing in March
spending will allow a good start for Q1 GDP growth.

**Market News International Washington Bureau: (202)371-2121**