Analysts at Nomura note that the US personal income rose 0.3% m-o-m in March after a similar gain in February and after remaining flat in February, personal spending increased 0.4% m-o-m in March, in line with market expectations but slightly weaker than Nomura’s forecast (Nomura: 0.5%, Consensus: 0.4%).

Key Quotes

“The saving rate declined 0.2pp to 3.1% in March.”

“The pickup in spending implies steady momentum going into Q2. However, some of rebound was likely due to idiosyncratic factors such as the delayed arrival of tax refunds and colder-than-usual weather in March. The pace of tax refunds in 2018 has been slow compared to historical standards, likely delaying households’ purchasing plans to later in Q1. The March 0.4% m-o-m gain in spending marked a strong rebound from the flat reading in February, consistent with delayed purchases.”

“In addition, colder-than-usual weather in March likely pushed up spending on housing and utilities by 1.2% m-o-m and contributing to a strong 0.6% m-o-m increase in overall service spending. Spending on goods was somewhat mixed. Durable goods spending rebounded, increasing 0.8% m-o-m after two prior months of declines, partly boosted by a pickup in spending on motor vehicles and parts. Nondurable goods spending declined 0.2% m-o-m as declining gas prices more than offset a rebound in spending on food consumption.”

“Looking ahead, we expect consumer spending to pick up notably in Q2 by 2.8% q-o-q saar, well-above the 1.1% reading for Q1. The monthly profile of real consumer spending for Q1 raised the jumping-off point for Q2, suggesting that the base-effect for the q-o-q growth of real consumer spending is estimated to be +0.9pp. Consumer optimism has remained elevated and personal tax cuts should help boost spending further.”