Highlights of the personal income and spending report:
- US May core PCE +1.2% y/y vs +1.2% y/y expected
- PCE deflator +0.2% vs +0.2% y/y expected
- Prior PCE deflator revised to +0.2% y/y vs +0.1% exp
- May personal spending +0.9% vs +0.7% expected
- Prior personal spending 0.0% (revised to +0.1%)
- May personal income +0.5% vs +0.5% expected
- Prior personal income +0.4% (revised to +0.5%)
Core PCE is the Fed's preferred inflation measure. The market is equally focused on the income and spending side of this report.
Better spending stands out and that was also the case in yesterday's Q1 GDP revisions. Never underestimate the spending ability of the US consumer, it was the largest jump in consumer spending since 2009. That will embolden Fed members who think a cold winter crimped the economy and that pent up demand will boost growth for the remainder of the year.
The jump in spending is the third solid month in a row but the 4-month moving average is still well-within the recent confines. Next month will be a test to show if it's the regular ebb and flow or something more.
The US dollar is about a dozen pips stronger across the board. Suddenly the dollar has found a footing and this report will keep the modest momentum going unless Greece mucks it up again.
