MNI DATA ANALYSIS: US February Core PCE Prices Up 1.6% Y/Y>

--Personal Income Up 0.4%; PCE Up 0.2%; Core PCE Prices +0.2% M/M

--Initial Jobless Claims Fall To 215,000; Annual Revisions Included

By Kevin Kastner, Sara Haire, and Holly Stokes

     WASHINGTON (MNI) - Personal income rose 0.4% in February, while 

nominal PCE was up 0.2% and the core PCE price index rose 0.2% in the 

month and 1.6% year/year, all as expected, data released by the Bureau 

of Economic Analysis Thursday morning showed. 

     The core price index's 1.6% year/year rise in February was an 

uptick from the 1.5% rates posted in the previous four months, but was 

still significantly below the 12-month rates seen in early 2017 and the 

Fed's 2.0% target. The current month's rate is the highest since April.

     Personal income was supported by another solid gain in wages and 

salaries, as well as proprietors' income and rental income, and a small 

gain in income on assets.

     The saving rate rose to 3.4% in February from 3.2% in January and 

2.4% in December, but the rate was still weak compared to a year 

earlier. Some analysts have suggest that the plunge in the savings rate 

over the last year, from a 2017 high of 4.1% in February of that year, 

has supported consumption. 

     Consumers, confident about the economy and job prospects, have 

shifted their priorities from saving to spending. However, an MNI 

analysis Wednesday suggested that much of that new spending is coming 

via credit cards rather than excess cash. 

     Disposable personal income rose 0.4% in the month. Personal taxes 

rose by 0.7% in the month after plunging by 3.2% in January. With the 

new tax law enacted, further declines in taxes are possible. Disposable 

income rose by 0.4%, same as pre-tax income, while real disposable 

income was up 0.2%. 

--ENERGY PCE PRICES DOWN 

     The 0.2% gain in current dollar PCE continues the string of gains. 

Spending on durable goods rose 0.2% in the month, but nondurable goods 

spending fell 0.2% on a 0.1% decline in energy prices. Services spending 

was up 0.3%.   

     Real PCE were flat in February, as the overall PCE price index 

rose 0.2% despite the energy price decline. The overall price index was 

up 1.8% year/year, modestly higher than the 1.7% gains in the previous 

three months.

     After inflation adjustment, durable goods PCE was up 0.6%, compared 

with the 0.2% nominal gain. Nondurable goods PCE was down 0.3% compared 

with the 0.2% nominal decline. Real services PCE was flat compared with 

the 0.3% nominal gain. 

     The average real PCE level in the first quarter was up only 0.6% at 

an annual rate from the fourth quarter average. PCE was up 4.0% in the 

fourth quarter GDP report. 

--CLAIMS LEVEL LOW SINCE 1973

     Also released on Thursday, initial jobless claims fell by 12,000 to 

215,000 in the March 24 week, well below the 230,000 level expected 

and the lowest level since the January 27, 1973 week. 

     Annual revision were included with the data. While making little 

change to the recent pattern, the revisions did bump up the recent low 

210,000 level in the February 24 week to 217,000.

     The four-week moving average fell by 500 to 224,500, as that 

217,000 level in February 24 week dropped out of the equation. The 

average could decline further next week if there is no change to the 

headline number as the 330,000 level in the March 3 week drops out. 

     Continuing claims rose by 35,000 to 1.871 million in the March 17 

employment survey week, but was down 51,000 from the 1.922 million level 

in the March 13 employment survey week. The data still suggest that 

labor markets remain tight and that workers are finding jobs fairly 

quickly. 

     ** MNI Washington Bureau: 202-371-2121 ** 

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