THE BASIS POINT

Higher Inflation & Pending Home Sales Leave Rates Flat

Stocks are up slightly and bonds are even today after slightly higher consumer inflation and better than expected pending home sales reports are washing each other out. This even-rate, higher-stock mood kicks off a big week of inflation, home price, and employment data that could push rates up.

The Fed’s preferred measure of inflation, the Personal Consumption Expenditures Index (PCE), showed inflation was up 0.4% in February and up 1.6% since a year ago. Removing oil and food prices, “Core” inflation was up 0.2% in February and up 0.9% since a year ago. The Fed often argues that food and energy are too volatile to count short-term, but even the Fed’s favored Core PCE inflation is trending up since October. Bonds tend to sell on such trends, which is how bonds opened but have since recovered to flat after the pending home sales data (below).

Personal income was only up 0.3% in February vs. 1.2% jump last month, and February savings is still a bit high at 5.8% vs. 6.1% last month. Consumer spending was up 0.3% in February after being flat last month. Here’s a full summary and table.

And pending home sales rose 2.1% in February. Bonds improved after this report beat expectations of 0.3% and was an improvement over the 2.8% drop last month. But it’s still down 8.9% from a year ago, and is the latest reminder that housing is still the weak spot in the economic recovery.