MNI DATA ANALYSIS: US January Core PCE Prices Rise 0.3%>

--Personal Income Up 0.4%; PCE Up 0.2%, But Real PCE Down 0.1%

--Initial Jobless Claims Fall 10,000 To 210,000; Lowest Since 1969

By Kevin Kastner, Sara Haire, and Holly Stokes

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

nominal PCE was up 0.2% and the core PCE price index rose 0.3% in the 

month and 1.5% year/year, all roughly as expected, data released by 

the Bureau of Economic Analysis Thursday morning showed. 

     The core price index's 1.5% year/year rise in January was the 

fourth in a row, still significantly below the levels in early 2017 and 

the Fed's 2.0% target. 

     Analysts had expected personal income to rise only 0.3% in the 

month, but a 0.5% jump in wages and salaries and solid gains in transfer 

payments and rental income caused the stronger-than-expected gain. 

Minimum wage increases in some states and the annual cost of living 

increase for Social Security provided much of that support. 

     Nominal PCE and the core price index both came in as expected. 

     The saving rate rose to 3.2% in January from 2.5% in December, the 

highest rate since August, but well below the levels seen early-last 

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

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

consumption. Consumers, confident about the economy and job prospects, 

have shifted their priorities from saving to spending. 

     Disposable personal income jumped 0.9% in the month, the strongest 

gain since January 2017. Personal taxes fell by 3.3% in the month on the 

introduction of the new tax law, so the rising level of personal income 

was able to boost disposable personal income. Real disposable income was 

up 0.6%. 

--ENERGY PCE PRICES REBOUND 

     The 0.2% gain in current dollar PCE followed stronger gains in the 

previous four months. Spending on durable goods fell 1.5% in the month, 

but nondurable goods spending rose 1.0% on a 3.0% rebound in energy 

prices. Services spending was up 0.3%.   

     Real PCE fell 0.1% in January, the first decline since January 

2017, as the overall PCE price index rose 0.4% due to the energy price 

surge. The overall price index was up 1.7% year/year, the same as the 

previous two months. 

     After inflation adjustment, durable goods PCE was still down 1.6% 

but nondurable goods PCE was flat, compared with the 1.0% nominal gain. 

Real services PCE was up 0.1%. 

     The January real PCE level was up only 0.7% at an annual rate from 

the fourth quarter average. PCE was up 3.8% in the fourth quarter GDP 

report. 

--CLAIMS LEVEL HITS ANOTHER LOW

     Also released on Thursday, initial jobless claims fell by 10,000 to 

210,000 in the February 24 holiday week, well below the 226,000 level 

expected and the lowest level since the December 6, 1969 week. 

     The four-week moving average fell by 5,000 to the lowest level seen 

since the December 27, 1969 week, as the 230,000 level in the January 27 

week dropped out of the equation. The average would decline further next 

week if there is no change to the headline number as the 223,000 level 

in the February 3 week drops out. 

     Continuing claims rose by 57,000 to 1.931 million in the February 

17 employment survey week, but was still down 9,000 from the 1.940 

million level in the January 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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