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REPEAT: MNI 5 THINGS: Expect Soft US PCE; Core Prices +0.2%

Repeats Story Initially Transmitted at 17:11 GMT Mar 28/13:11 EST Mar 28
--5 Things To Look For In US Feb Personal Income Report
By Sara Haire and Holly Stokes
     WASHINGTON (MNI) - The Personal Income report will be released Thursday,
with the median forecast among analysts in an MNI survey calling for a 0.2% gain
in the core PCE price index, a 0.4% gain in personal income, and a 0.2% gain in
current dollar PCE.
     Ahead of the release, we outline five themes for particular attention.
- HISTORY OF MISSING PERSONAL INCOME
     The recent trend in analysts' forecasts points to little risk for core PCE
price index, however, personal income is likely to vary from the median
expectation. The core PCE price index is forecast to come in at 0.2%, with no
variation of forecasts amongst analysts, suggesting a greater likelihood of
coming in as expected. Personal income, on the other hand has been
underestimated five times, overestimated four times, and came in as expected
only four times since January 2017. The risk to the median expectation for
personal income is heightened given that the last four months have come in both
over and under expectations twice each. 
- PERSONAL INCOME TO SHOW CONTINUED STRENGTH
     Personal income is expected to again rise 0.4% month/month, which would
make it the eighth month of 0.3% or larger gains and the longest streak since
2014. Some analysts expect a more muted, albeit still strong, 0.3% gain due to
February's Nonfarm Payrolls Report showing year/year average hourly earnings
slipping to 2.6%. However, the 313,000 surge in nonfarm payrolls, coupled with
the overall average weekly earnings rising 0.4% month/month or 2.9% year/year,
implies the potential for another stronger gain in personal income - with a few
analysts even calling for a 0.6% print.  
- PERSONAL SPENDING TO SLOW AFTER STRONG 4Q
     Nominal personal spending is expected to continue January's soft reading,
but analysts are at odds for just how weak the figure will be - with forecasts
ranging between a decline of 0.1% and a gain of 0.3%. If nominal personal
spending comes in negative, this would be the first decline since January 2015.
The third estimate of 4Q GDP showed that personal consumption was up a strong
4.0%, even higher than previously thought. This upswing in 4Q GDP gives the
potential for December PCE to be revised higher, January PCE to be revised
lower, and February PCE to surprise to the downside, as consumers rein in
spending after reaching lofty levels. 
- WEAK ENERGY TO HIT SPENDING
     Posing potential threats to personal spending are utilities and gas
expenditures. Gas is expected to drag due to falling pump prices, as utility
usage may have moderated due to unseasonably warm February weather in most of
the country. The East Coast saw some of the earliest warm weather ever recorded
in the month, which should soften utilities spending. However, potentially
cushioning this blow, the West did see record breaking bitter cold temperatures,
which should keep utility usage in the region at more normal highs. The 0.1%
gain in CPI Energy, which tracks closely with PCE Energy Goods & Services,
suggests that energy overall should post a soft reading.
- CORE PCE PRICE INDEX Y/Y PICKING UP, BUT STILL SOFT
     The closely monitored core measure of PCE is unlikely to surprise with a
0.2% gain, coming in higher than the 2017 average of a 0.1% increase and,
combined with the 0.3% rise in January, suggesting 1Q is off to a good start. If
it is a strong 0.2% rise in the month, it could push the year/year up to 1.6%,
ending the four month string of the 1.5% year/year pace. But, before assuming
inflation is showing signs of acceleration, this rise to 1.6%, while stronger
than recent months, still falls below the 1.9% and 1.7% year/year pace in 2017
and 2016, respectively. 
--MNI Washington Bureau; +1 202-371-2121; email: holly.stokes@marketnews.com
--MNI Washington Bureau; +1 212-800-8517; email: sara.haire@marketnews.com

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