NEW YORK, N.Y. — March 2013 personal consumer expenditure (PCE) rose 0.2 percent, which was better than the unchanged activity that was expected, RBC Economics reported today. The increase managed to build further onto the unrevised 0.7 percent gain in February. The increase in March was solely due to a 0.7 percent jump in spending on services, which managed to offset declines in both non-durables (1.1 percent) and durables (0.2 percent). A colder than normal March contributed to increased demand for heating utilities.
The increase on a volumes basis was up a slightly stronger 0.3 percent. The gain was once again solely attributable to the services component, which rose 0.6 percent in the month. The non-durables component declined on a volumes basis as well ,although by a lesser 0.4 percent compared to the volumes measure, and largely reflected the effect of falling gasoline prices, according to Paul Ferley, assistant chief economist for RBC Economics. Similarly, the volume of durables was flat, thereby implying that the weakness in nominal sales reflected falling prices.
Personal income rose 0.2 percent in the month following a 1.1 percent surge in February. Expectations had been for a stronger 0.4 percent gain in the month. The main downward surprise was a 0.4 percent decline in “receipt from asset components.” With the increase in income matching the increase in spending, the saving rate in March remained unchanged at 2.7 percent.
“Today’s PCE report for March provided the monthly detail of the 3.2 percent annualized quarterly increase in consumer spending reported in Friday’s advance first-quarter 2013 GDP report, which was up from the 1.8 percent recorded in the fourth quarter of 2012. This monthly detail encouragingly implied a very slight upward trend during the quarter,” said Ferley.
“With some of the strength in March weather related, however, we assume some payback in April with spending growth moderating. As well, some greater restraint in consumer spending may yet emerge going forward reflecting the Jan. 1, 2013 payroll tax increase along with the March 1, 2013 introduction of forced government spending cuts, i.e., sequestration. These factors are expected to contribute to second-quarter 2013 consumer spending growth trending back down closer to the fourth-quarter 2012 rate rather than being maintained at the first quarter of 2013’s gain. Signs of slowing consumer spending growth will keep the Federal Reserve wary and thus inclined to keep monetary conditions highly accommodative in the near term,” concluded Ferley.
SOURCE: RBC Economics press release