February Core Inflation Hits 2.8%, Exceeding Expectations; Spending Rises 0.4%

February Economic Data Overview

• 📊 February income saw a solid increase, with the latest figures showing an 8/10% rise, following a 9/10% increase the previous month, marking a strong back-to-back performance.
• 📉 Spending reversed its previous negative trend, rising 4/10% as expected, after a significant drop of 2.10% the prior month, which was the first negative in two years and the biggest drop in four years.
• 💡 Real spending, adjusted for inflation, also saw a reversal, increasing by 1/10enth after a 0.5% decrease, which was the first negative in a year and the largest drop in four years.

PCE Inflation Details

• 📈 Overall PCE month-over-month matched expectations at 3/10%, and the year-over-year rate remained steady at 2.5%.
• 🔥 Core PCE month-over-month came in hotter than anticipated at 4/10%, making it the warmest reading in approximately a year.
• ⚠️ Core PCE year-over-year also exceeded expectations, reaching 2.8%, which is the warmest rate seen since the end of the previous year.

Revisions and Market Reaction

• 📝 Revisions indicated that income was slightly higher (0.9% up to 0.7%), while spending figures saw minor negative adjustments (spending from -2.10% to -0.3%, real spending from -0.5% to -0.6%).
• 📉 Despite slightly hotter PCE numbers, yields have moved down, with the 10-year Treasury hovering around 4.31%, down five basis points on the day.
• 📈 The yield curve is steepening, with the spread between 10-year and 2-year Treasuries reaching approximately 35 basis points.