After we saw yesterday that the United Stated contracted by 6.1 percent, today we see that personal income declined which dragged down personal spending while the nation's favorite measure of inflation slightly inclined, though the U.S. still faces deflation risks.
The Commerce Department released its personal income for the month of March coming in at -0.3% which is worse than both readings the prior and projected -0.2 percent. Meanwhile, personal spending fell 0.2% from February's revised reading of 0.4% from 0.2% while the markets were expecting it to come in at -0.1 percent.
Americans are dealing with eroded incomes as a result of companies lowering salaries as they are doing whatever it takes to reduce expenses, which means that if they are not laying off then they are cutting back on salaries. It was reported that salaries declined 0.5 percent.
When incomes are lowered then spending therefore is reduced which means that consumers are not helping the U.S. recover especially as consumption represents three-fourths of the GDP. With consumers not spending, this means they are saving as we see that the savings rate rose to 4.2 percent.
From the lack of spending in the nation, therefore stores are forced to lower prices as a way to lure consumers which triggers deflation risks in the nation. Also released for today was personal consumption expenditure (PCE) Core for March coming in at 0.2% inline with the prior reading and higher than the predicted 0.1 percent. On the year we see that it was unchanged from the preceding reading of 1.8% and inline with anticipations.
Since wages are decreased this means that it could weigh on prices therefore causing inflation to fall below the bank's set target rates while the Feds are already using all possible measures to avoid deflation while trying to shore up economic growth.
Also released was PCE deflator for the year ending in March coming in at 0.6% a plummet from the prior 1.0% and worse than the projected 0.7 percent.
Turning to the job market we see that initial jobless claims came in showing that 631 thousand Americans filed for jobless benefits which is better than both the revised previous of 645 thousand from 640 thousand while analysts were speculating that 640 thousand were filing for state unemployment benefits. The four-week average of these claims declined by 10,750 to 637,250.
From lower than projected unemployed workers filing for governmental support, companies are slowing down their pace of firing yet we are still aware that the job market is softening therefore undermining growth prospects but the pace of the recession is easing.
Continuing claims came in showing that 6271 thousand are still filing for jobless benefits which is worse than the revised prior reading of 6138 thousand from 6137 thousand while it was forecasted to come in at 6200 thousand. The four-week average of continuing claims jumped by 131,500 reaching 6.08 million.
As there are still people looking for jobs and continuing to file for state unemployment benefits while struggling to find one gives us proof that demand in the nation remains weak because industries are lowering production to balance current supplies with dampened demand.
In other news we see that the manufacturing sector improved as the contraction narrowed to 40.1 from 31.4 while it is higher than the predicted reading of 35.0. Since the reading remains below 50 it is contracting yet higher than 50 would mean an expansion.
Now looking at Canada we see that they released their GDP for the month of February coming in showing that the contraction narrowed to -0.1% from the prior month of -0.7%. The slwoing shrinkage in economic growth is further supporting that the pace of the global recession is easing.
Also Canada released its raw materials price index for the month of March coming in at 12.1% higher than the revised prior reading of 1.6% from 1.7% while the industrial product prices for the same month fell to 0.3% from the revised February's reading of 0.5% from 0.4%.
Although the U.S. data was not that optimistic yet there are hopes floating in the markets that the global recession is easing which supported the stock markets to incline causing the Standard & Poor's 500 to mark its biggest rise since 1991. As 14:10 GMT the DJIA gained 104.65 points or 1.28% to 8,290.38 points, the S&P 500 leaped 11.99 points or 1.37% to 885.63 points while the NASDAQ climbed 33.45 points or 1.95% to 1,745.39 points.