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National Economic Indicators

Research staff regularly monitors the national economy, helping the Richmond Fed grasp current conditions and their implications for monetary policy. Updated weekly, the following data is part of the information presented during policy discussions and meetings with our board of directors.


Latest Commentary

Last Friday's data release showed personal income soared 21.1 percent in March, the fastest monthly growth rate since the Bureau of Economic Analysis started publishing the data in 1959. The surge in income reflected fiscal support payments, with government social benefits up 96.2 percent versus February levels. However, income from wages and salaries rose 4.4 percent monthly, the fastest since the start of the pandemic. Adjusted for inflation, disposable personal income grew 23 percent monthly and is 9.4 percent higher than pre-pandemic levels. In contrast, the recovery in real personal consumption expenditures has been more gradual, rising 3.6 percent monthly, and is now 1.4 percent above pre-pandemic levels. The personal saving rate rose to 27.6 percent, the highest since last April.

The more modest growth in expenditures highlights that we're just in the first month of the spring recovery, although expectations have risen with each monthly data release. In line with that, twelve-month core PCE inflation in March remained below target, at 1.8 percent, compared to 1.4 percent in February. Looking ahead, twelve-month core inflation will look higher the next two months due to the pandemic-related dip in the core PCE price index last year. One way to see past these base effects is to look at changes over shorter periods of time. In March, core PCE grew 2.6 percent annualized over the past three months, compared to a 2.4 percent rate in February. While this was the fourth straight month of increase, the rise in inflation largely reflects temporary factors such as supply-chain disruptions, and may not indicate a persistent inflationary process, as noted in the April FOMC statement.

Achieving inflation moderately above 2 percent for some time is a central goal of the Fed, and it will take stronger inflation data to feel confident that goal is within reach. One key ingredient toward achieving the goal is rising wages. Friday's data release had optimistic news on that front with the employment cost index (ECI) for total compensation rising 0.9 percent in the first quarter. The ECI for wages and salaries rose 1 percent in the first quarter, up from 0.8 percent the prior quarter. The ECI for wages and salaries in the leisure and hospitality industry rose 1.6 percent, the fastest quarterly growth rate since the first quarter of 2017, an encouraging sign for an industry where employment levels are down over three million versus pre-pandemic levels.

Commentary by John O'Trakoun updated May 3, 2021. The views expressed are those of the author and do not necessarily reflect those of the Federal Reserve Bank of Richmond or the Federal Reserve System.


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