Highlights
Today's personal income report shows both a robust consumer sector but also lingering high core inflation. Personal income jumped 1.0 percent in January, following a 0.5 percent boost in December. January's figure was well above the consensus forecast for a 0.3 percent increase in personal income. The important wages & salaries component increased 1.2 percent, following a 0.5 percent jump in December.

The January increase in personal income was boosted by several special factors. Bonus payments and gains on the exercise of stock options boosted private wage and salary disbursements; pay raises for federal civilian and military personnel boosted government wage and salary disbursements; and cost-of-living adjustments to several federal transfer payment programs boosted current personal transfer receipts.

Personal income is up 5.3 percent year-on-year, compared to up 5.6 percent in December. On the same basis, the wages and salaries component declined to up 5.0 percent year-on-year in January from up 5.8 percent in December.

Consumer spending remains quite healthy as personal consumption expenditures advanced 0.5 percent, following a 0.7 percent increase in December. The consensus had projected a 0.4 percent boost in consumer spending. By components, personal consumption was actually led by services - which is not common except when durables and nondurables are weak, which is not the case in January. Services PCEs increased 0.7 percent in January, following a 0.4 percent rise the prior month. Durables advanced 0.5 percent in January while nondurables rose 0.3 percent. Personal consumption is up 5.5 percent year-on-year in January, versus 5.9 percent in December. The personal savings rate edged up to minus 1.2 percent in January from minus 1.4 percent the month before.

On the inflation front, the overall PCE deflator rose 0.2 percent in January, following a 0.3 percent boost the prior month. However, the core PCE price index (excluding food and energy) firmed with a 0.3 percent increase in January, following a 0.1 percent rise in December. The market had forecast a 0.2 percent rise in the core PCE price index. The unrounded percent change for the core PCE price index was 0.25401, compared to 0.12672 in December.

On a year-on-year basis, the overall PCE deflator is up 2.0 percent in January, compared to up 2.3 percent in December. On a year-on-year basis, the core deflator edged back up to up 2.3 percent from up 2.2 percent in December.

Today's numbers keep the Fed on hold and neither the bond market or equity markets will like that.