US: Personal spending and income data in focus – BMO CM

In view of the analysts at BMO Capital Markets, despite surging employment and confidence, consumers struggled out of the gate this year after a strong 2016 and they judge the setback is temporary; but for now, it’s the main reason they had cut their Q1 GDP growth call to 1.8% annualized.

Key Quotes

“And, we are still sharpening our scalpel in the event that the February personal spending report surprises to the downside. After dropping 0.3% in January, real spending was likely flat in the month, as auto sales stalled (albeit at high levels), retail sales slowed, and home-heating demand was sliced by one of the mildest February’s on record. Lower gasoline prices will undercut nominal spending, which should rise only slightly in the month.”

“The consumer pullback flies in the face of a powerful wealth effect from rising equity and home prices, along with strong job growth boosting personal income. The latter likely rose 0.4% in the month and 4.5% y/y. Meantime, underlying inflation should remain in check by the strong dollar and intense retail competition, with core prices likely rising 0.2% m/m and the yearly rate holding steady at 1.7% for a third straight month.”