Nominal personal income increased by 0.4%, which matched the expected 0.4% increase. Real personal disposable income was unchanged and follows a 0.2% reading in March. Aggregate real personal spending was 0.5% higher in April, after an unchanged reading in March. The 0.5% reading in real spending was the result of increases in spending on durable goods of 1.4% and nondurable goods of 0.4%, while spending on services also rose by 0.3%. As a result, the savings rate dipped to 4.1%.  Private sector wages and salaries (roughly 45% of personal income) were 0.5% higher in April (current dollars), following a 0.3% reading in March. Meanwhile, government sector wages and salaries were 0.4% higher and are now 5.3% higher annually.

Private sector wages and salaries increased by 5.6% over the previous year (historical median was 6.4% for 1960-2016), which is extremely high but below the 11% pace at the start of the year. Lastly, the PCE price index and the core price index rose by 0.4%. The annual changes were higher at 4.4% and 4.7%, respectively. 

The reality is that the U.S. consumer continues to hold up quite well, and certainly better than many anticipated. This stability is likely a function of a number of factors, including low debt levels, the still extremely low unemployment rate, residual excess savings, falling inflation, and mortgage rates that have been locked in and therefore are slow to feel the impact from the sharp increase in rates. Today’s data, for example, reveals that excess savings can still be estimated at about $500 billion. However, it is worth remembering that monetary policy acts with long and variable lags, and as we start to see more pressure on corporate profit margins due to slower growth, this in turn will put more pressure on companies to cut costs, including labor. The Fed’s favorite inflation data in this report was clearly disappointing, and while the trend rate is still for disinflation, it raises some doubts about current expectations for a pause in June.