Consumers Are Cautious Despite Income Growth

Earlier this week, the Federal Reserve kept interest rates unchanged and downgraded its assessment of domestic growth from “moderate” to “slowed.” Looking at the U.S. dollar, it still remains under pressure, hovering near a six-month low amid signs of slowing growth in the U.S. economy and easing pressure on the Fed to continue to remove accommodation.

At the same time, Federal Open Market Committee (FOMC) removed the language highlighting the Fed’s focus on international “risks” redirecting policy makers’ attention back to the domestic economy.

So going forward, if the U.S. economy gains momentum, the Fed appears well positioned for a second rate hike sooner than later. However, following a GDP reading of less than 1% for the first three months of the year, further improvement may be needed prior to this hike.

Oil prices traded higher following the U.S. Department of Energy’s recent report showing a reduction in domestic crude production. Brent crude is up 0.25%, currently trading around $48 a barrel.
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Also personal income rose 0.4% in March, beating Bloomberg’s estimates calling for a 0.3% rise. Compensation rose 0.3% in March with a 0.4% rise in the wage and salary component. Disposable income increased 0.4% at the end of the first quarter, a two-month high. Compared to last year, personal income is up 4.2%, and improved from a 3.9% pace reported in February.

Personal spending rose 0.1% in March, falling short of an expected 0.2% rise, from the Bloomberg consensus. February spending was revised up from 0.1% to 0.2%, as well as January consumption.