MNI DATA PREVIEW: US January Core PCE Prices Seen +0.2%

     WASHINGTON (MNI) - The personal income report for February will be released

on Friday, but will include only January data for the consumption and price

measures.

     The median forecasts in an MNI survey see personal income rising by 0.3%

after a 0.1% dip in January, while nominal PCE is expected to rise by 0.3%. The

Bloomberg consensus estimates agree with these forecasts. There is a divergence

between the MNI and Bloomberg estimates for core PCE prices, with MNI seeing a

0.2% gain and the Bloomberg estimate looking for a flat reading.

     Ahead of the release, we outline important themes for particular attention:

     --CORE PCE PRICES WELL FORECASTED

     Over the last year, analysts' estimates for core prices in the MNI survey

have been on target eight times. With just two underestimates and one

overestimate, a miss this month is unlikely. Based on their history of

accurately estimating the core PCE price index, there is no risk to their

expectation of a 0.2% gain in January.

     --HOURLY EARNINGS BOOST

Despite a significant slowdown in payrolls growth and a drop in average weekly

hours in the February employment report, personal income is expected to rebound

from a 0.1% decline last month due to a large 0.4% rise in average hourly

earnings. This increase in earnings should translate into a stronger reading for

personal income in February, supporting analysts' forecast for a 0.3% gain.

Likewise, the large January dip in return on assets, which stemmed from lower

interest and dividend receipts, is unlikely to be repeated.

     --PRICES TO TICK UP

     In January, the core Consumer Price Index posted a 0.2% increase on the

month, suggesting that the upcoming core PCE Price Index number, which is for

January, could also increase moderately. Although the two indicators are

measured differently, they are still similar, and historically track well

together.

     --RETAIL SALES REBOUND

     After a poor retail performance in December, and a corresponding 0.5% drop

in personal consumption expenditures, data on retail sales excluding motor

vehicles from January suggest that personal consumption expenditures will

rebound in the coming report.

--MNI Washington Bureau; tel: +1 202-371-2121; email: kevin.kastner@marketnews.com

--MNI Washington Bureau; +1 (973) 494-2611; email: harrison.clarke@marketnews.com

--MNI Washington Bureau; +1 202-371-2121; email: shikha.dave@marketnews.com

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