We expect a 0.1% increase in January’s core PCE price index, which would be below core CPI at 0.2%. This would mark a reversal from December's data when a 0.2% core PCE price index outperformed core CPI's 0.1% print.
A weak January 2019 result would still result in core PCE prices rising to 1.7% y/y from 1.6% y/y. Meanwhile, more weak data are due to drop out in February. Overall PCE prices will likely match a 0.1% increase in the CPI, with growth increasing to 1.8% y/y from 1.6% y/y as weakness from a year ago drops out.
We expect to see 0.3% increases in both personal income and spending from January. Before rounding, however, we see income marginally outperforming, which would lift the savings rate to 7.7% from 7.6%.
Based on the non-farm payroll print, we expect a 0.4% increase in January's wages and salaries due to gains in employment and earnings. Retail sales increased by 0.3% in January, but a weather-induced dip in utilities will restrain services spending.