- Personal Spending for April rose .6% versus estimates of a .6% increase and a .5% gain in March.
- The PCE Core for April rose .2% versus estimates of a .2% gain and a .3% increase in March.
- Final Univ. of Mich. Consumer Confidence for May rose to 79.1 versus estimates of 79.0 and a prior estimate of 79.0.
BOTTOM LINE: Consumer spending in the US rose .6% in April, mainly reflecting an increase in prices that suggests inflation is taking a toll on Americans’ buying power, Bloomberg said. The Core PCE, the Fed's favorite inflation gauge, rose 2.1% from year-ago levels. Incomes rose 5.4% in April from the same month last year, almost twice the rate of most inflation measures. Economists expect consumer spending to slow to 2.5% this quarter. I continue to believe spending will slow to average rates through year-end, while incomes will remain relatively healthy and inflation measures decelerate from current levels.
Consumer confidence in the US fell to its lowest in seven months in May as near-record gas prices eroded purchasing power, Bloomberg said. The current conditions index fell to 96.1 from 109.2. The expectations index fell to 68.2 from 73.4 in April. The average price of regular gasoline was $2.88/gallon on May 22 versus $2.14/gallon in May 2005. I continue to believe consumer sentiment is irrationally low and will make cycle highs later this year as stocks rise sharply from current levels, interest rates fall modestly, inflation decelerates, gas prices fall, the job market remains relatively healthy and Iraq improves.
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