Most financial, commodity and currency markets were confined in a narrow range on Thursday with many of the world’s key markets closed for the Good Friday holiday. End-of-the-month and end-of-the-quarter position-squaring throughout the week also opened the door for many of the major players to even take an early holiday as evidenced by below-average volume.
There were a few U.S. economic reports that helped give the markets some direction, but other than the strong surge in U.S. equity markets and a spike in natural gas, the trading action was muted.
Core PCE Price Index
The Core PCE Price Index, the Federal Reserve’s preferred inflation measure, showed moderation in monthly inflation readings after prices pushed higher in January. The personal consumption expenditures (PCE) price index excluding the volatile food and energy components rose 0.2 percent last month after advancing 0.3 percent in January.
That lifted the year-on-year increase in the PCE Price Index to 1.6 percent, the biggest gain since February 2017, from 1.5 percent in January. It should be noted that the PCE Price Index has been below the U.S. central bank’s 2 percent target since mid-2012.
Looking ahead, economists believe the annual core PCE price index could accelerate to 1.9 percent in March as last year’s weak reading drop out of the calculation.
Personal Spending
The U.S. Commerce Department reported on Thursday that consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.2 percent last month after posting a similar gain in January.
Spending on long-lasting goods, such as motor vehicles, rebounded 0.2 percent after tumbling 1.5 percent in January. Outlays on services rose 0.3 percent, matching January’s increase. Economists had forecast consumer spending increasing 0.2 percent in February.
The steady rise in inflation last month also helped curb consumer spending. When adjusted for inflation, consumer spending was unchanged in February after falling 0.2 percent in the prior month. That suggests a sharp slowdown in consumer spending in the first quarter after it surged at an eye-popping 4.0 percent annualized rate in the fourth quarter.
Personal Income
In February, personal income rose 0.4 percent and has now increased by the same margin for three straight months. Wages increased 0.5 percent last month after climbing 0.6 percent in January.
The government also said that savings increased to $497.4 billion in February, the highest level since August 2017, from $471.3 billion in the prior month. The savings rate rose to a six-month high of 3.4 percent from 3.2 percent in January.