March Personal Income rose by .3%, coming in below market expectations of a .4% increase, while matching the now revised lower prior month’s result of +.3%. Personal spending rose by .4%, which was in-line with expectations, and now follows a prior +.2% increase. This stronger spending has also pulled the savings rate down from 3.3%, to now 3.1%. The PCE deflator came in unchanged after a prior +.2%, coming off energy prices falling by -2.8%, thus offsetting any gains in the food or core sectors. Looking at core PCE, we see a rise of .2%, as expected. Year over year data now confirms headline PCE rose to 2.0% from a previous +1.7%, while the core also rose, up from 1.6%, to now 1.9%. Overall, no big surprises in the data this week, although given the revisions to prior months’ reads on income and spending, combined with slightly lower March’s results, this would now indicate Q1 personal consumption data could be very well revised lower in the reports ahead.
Pending Home Sales for March rose by the second consecutive month, posting a .4% increase to 107.6. Although the number was below estimates of a .7% increase month-over-month, the print is still the highest since back in December of last year when we saw a 109.8 on the index. Looking by regions, sales rose by 2.5% in the South, +2.4% in the Mid-West, -1.1% in the West, and -5.6% in the Northeast. Finally, looking at the year over year sales for March, we now see a decline of -4.4%.
An as-expected Statement from the Fed this week with some very slight language drops and changes, specifically on the economy and inflation, as well as some more positive outlook on business investments were pretty much any highlights on the hour. The Fed did add the “symmetrical” note to the inflation target, however, the overall sentiment that levels are expected to still “run near” doesn’t really change much of what we knew before. Possibly this add was an intention to note that any deviations from targets don’t necessarily warrant a response in policy. Finally, the Fed’s stance on policy remains “accommodative” and that tells us that continued rate changes are in the cards, but no hinting so far of needs for a fourth change this year. The market is still pricing in a very high percent that we will get the next rate hike from the June 13th meeting.
Non-farm Payrolls came in at +164K with the unemployment rate falling to 3.9% on Friday. This is a touch disappointing as it is below the 3-month moving average (job growth) yet probably is good enough to maintain a tight labor market and allow the Fed to raise short term rates in June. Average hourly earnings were not a factor (inflation wise) as they rose a slim .1% with last month’s plus .3% revised lower to plus .2%. The average hourly workweek metric came in spot on at 34.5 hours. Manufacturing jobs rose 24K, construction added 17K, and professional/business services were plus 20K. One measure you may find interesting is the number of workers employed part time but report wanting full time employment, coupled with workers not in the labor force but report wanting a job fell to 7.0%, the lowest level since 2001. Slack in the labor market continue to evaporate as the unemployment number, after 6 months at 4.1% has slipped to 3.9%. This is now the lowest level in 18 years.
As we end the week, we see the 10yr yield still trading around the mid-2.90s, and while we’ve had a few tests below ~2.95% this past week, we are yet to see any convincing move or sentiment that tells us that interest rates are headed lower in a stronger fashion. That said, our technical call that the double top now at ~3.03% should hold in the short-term, still sets us up for a possible move to better levels in the week(s) ahead. For now, much of the same choppy trading patterns with levels a little worse, then a little better, and so forth... all while the markets look for the next catalyst to make a more significant move in either direction.