Income And Inflation

This morning’s income report showed a nice gain of .4%, unfortunately or fortunately depending on how you look at it consumers only spent .1% of that gain. For the economy, we would want them to spend all of it for long-term economic health and for the individual consumer it is wise to save more money. At least we are seeing growth in income levels, for people that has been rare in recent years. 

On the other hand, that increase in income pushed up core inflation by .2%. Though that is not a big number it did increase the PCE inflation figure to 2.1% annually which is .1% higher than the long-term target set by the Fed. So if the Fed sees inflation building they will increase rates, a course they have already set. 

Expect more interest rate increases and more spending by the consumer. Frankly, we want both just in moderation and so far that is what we are getting.