Personal Income and Outlays
The other headline numbers in the report gave us mixed results. They showed income rose 1.0%, twice as much as predicted. That is bad news for bonds and mortgage rates because more income allows consumers to spend more, fueling economic growth. However, the 0.2% increase in spending tells us that consumers did not spend any more than expected, despite the additional income. Accordingly, these readings are neutral to slightly negative for rates. It is the PCE numbers that are contributing to this morning’s bond strength than anything else.