PCE Report: Fed's Preferred Inflation Gauge Rises 3.5% In March, Q1 GDP Comes In At 2%

• Consumer spending, adjusted for inflation, increased 1.6% in March after stagnating in January, outpacing the 0.6% increase in personal income.
• In absolute terms, personal income decreased $149.2 billion in March, while disposable personal income rose $142.5 billion.
• Personal consumption expenditures increased $195.4 billion, while personal outlays increased $198.6 billion during the month.

The Personal Consumption Expenditures (PCE) Index, which is the Federal Reserve’s preferred gauge of inflation, advanced 3.5% in March on an annualized basis.

The Commerce Department data showed that core PCE, which excludes food and energy, rose 3.2% on an annualized basis in March, up 0.3% on a monthly basis.

Both PCE and core PCE were in line with analyst forecasts, according to a Dow Jones estimate as cited by MarketWatch.

This is the first PCE print after the Iran war began, following attacks by the U.S. and Israel on February 28.

PCE is now at its highest level since August 2023, while core PCE is at its highest level since November 2023.

Source: Bureau of Economic Analysis, U.S. Department of Commerce

Q1 GDP Misses Expectations

Data from the Bureau of Economic Analysis showed that the U.S. economy grew at an annualized rate of 2% in the first quarter (Q1), falling short of Wall Street’s expectations of 2.2% growth.

This is the second consecutive quarter of GDP growth miss. BEA data showed that the U.S. economy grew at an annualized rate of 0.5% in the fourth quarter (Q4), compared to a Dow Jones forecast of 0.7%.

Consumer Spending Gathers Steam

Consumer spending, adjusted for inflation, increased 1.6% in March after stagnating in January, outpacing the 0.6% increase in personal income.

In absolute terms, personal income decreased $149.2 billion in March, while disposable personal income rose $142.5billion. Personal consumption expenditures increased $195.4 billion, while personal outlays increased $198.6 billion during the month.

Personal savings stood at $857.3 billion in March, while the personal saving rate was 3.6%.

Jobless Claims Fall To Lowest Levels Since 1969

Meanwhile, jobless claims fell in the week ended April 25 to 189,000 from 215,000 in the prior week, higher than a Dow Jones estimate of 212,000, as cited by MarketWatch. This is the lowest level since March 15, 1969, according to data from the U.S. Department of Labor.

The four-week moving average for jobless claims, which smooths weekly volatility, fell by 3,500 to 207,500.

Continuing claims, which refer to the number of people claiming unemployment benefits beyond the first week, hovered in the 1.79 million range for the week ending April 28, decreasing by 23,000 over the previous week’s revised level.

Meanwhile, U.S. equities gained in Thursday’s pre-market trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, rose 0.45%; the Invesco QQQ Trust ETF (QQQ) rose 0.63%; and the SPDR Dow Jones Industrial Average ETF Trust (DIA) gained 0.55%. Retail sentiment on Stocktwits regarding the S&P 500 ETF was in the ‘bullish’ territory.

The iShares 7-10 Year Treasury Bond ETF (IEF) was up 0.24% at the time of writing.

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