Highlights
Today's personal income report came in with strong income growth and easing inflation. Personal income posted a strong 0.7 percent gain in March, matching the increase in February. The March number was above the consensus forecast for a 0.6 percent boost in personal income. The important wages & salaries component rose 0.7 percent, following a 0.5 percent advance in February. Wages and salaries make up about two-thirds of personal income.

Personal income on a year-on-year basis rose to up 5.7 percent from up 5.5 percent in February. On the same basis, the wages and salaries component firmed to up 4.6 percent year-on-year in March from up 4.5 percent in February.

Personal consumption expenditures increased 0.3 percent, following a 0.7 percent rise in February. Spending came in below the consensus forecast for a 0.5 percent gain in consumer spending. A negative in this report is that much of the gain in consumer spending was price related - especially for nondurables which includes gasoline sales. Chained dollar ("real") PCEs actually slipped 0.2 percent in March, following strong gains in prior months. Real PCEs rose 0.4 percent each month from November through January and then rose 0.3 percent in February.

On the inflation front, the overall PCE deflator was still high with a 0.4 percent in March, the same as in the prior month. However, the core PCE price index (excluding food and energy) eased to no change, following a 0.3 percent rise in February. The consensus had forecast a 0.1 percent rise in the core PCE price index. The unrounded percent change for the core PCE price index was 0.04931 percent, compared to 0.32774 percent in February.

On a year-on-year basis, the overall PCE deflator is up to up 2.4 percent in March, compared to up 2.3 percent in February. On a year-on-year basis, the core PCE deflator slipped to up 2.1 percent from up 2.4 percent in February.

The personal saving rate rose in March to minus 0.8 percent from minus 1.2 percent in February.

Today's numbers should be favorable for both equities and bonds since the consumer sector is in good shape and core inflation slowed. While real PCEs slipped in March, this should not be a concern given the strong prior gains and continued strong income growth. However, the Fed has to be scratching its head over whether income growth can remain so strong and core inflation really come down.