Fed’s Favorite Inflation Measure Tame In March. Consumer Spending Up Most In 5mo.

Overall Personal Consumption Expenditures, the Fed’s favorite measure of consumer inflation, were 0.1% in March and 2% year-over-year through March. Excluding volatile oil and food costs from the readings, “Core” PCE price index for March was 0.1% and 1.3% YOY through March. The Fed looks closely at Core PCE excluding food and energy prices because of the price volatility of these two items, and the Fed’s zone for reasonable inflation is 1-2% per year. This 1.3% Core inflation (and the fact that PCE inflation has been stable since summer 2009) is within their comfort zone and reconfirms their statement last week that inflation is likely to be subdued for some time.

Personal income was 0.3% in March after 0% in January and 0.3% in February. Wages were 0.2% in March after being flat in March and increasing 0.4% in January. The household savings rate dropped from 4.8% in December and 3% in February to 2.7% in March. The 12 month average savings rate is 4% which is well below the May 2009 all-time record of 6.9%. Consumer spending was up 0.5%, the most in five months. Below are all key details from the Personal Income & Outlays report. You can automatically create charts and download historical PCE data by scrolling to our data section on the right side of the site, or visiting our Data page.