Personal income is expected to have risen in March as better weather helped many people get back to work.
Economists surveyed by Bloomberg estimate that U.S. personal income rose by 0.4% in March, following increases of 0.3% in both January and February.
“I do expect to see solid income growth,” said Robert Dye, chief economist at Comerica Bank, who predicts a 0.4% uptick in income.
Dye said recent job growth is one reason we can expect to see an encouraging income and spending report from the Commerce Department, which will be released on Thursday.
“We’re seeing employment ticking up in February and March,” he said.
Spending is expected to rise as well. Eugenio Aleman, senior economist at Wells Fargo Securities, said he estimates a 0.6% increase in consumer spending for March, which would be double the increase from February.
The GDP report released by the Commerce Department today showed that consumer spending increased by 3% in the first quarter of 2014.
“Consumer expenditures were strong in the first quarter of the year,” said Aleman. “I still believe that the economy is improving, and this is probably one of the reasons why,” noting that spending on services was particularly strong in the first quarter because of people heating their homes.
The Affordable Care Act helped boost up spending and income numbers during the sluggish winter because of expanded Medicaid and government subsidies, which led to more people spending on healthcare. But it’s unclear how much the act will continue to affect these numbers.
“It’s such a new thing. It’s very difficult to gauge,” said Aleman.
Even with better spending and income numbers predicted for March, inflation is expected to stay stagnant and far from the Fed’s 2% target. Dye said the price index for personal consumption expenditures, which is the Fed’s preferred measure of inflation, won’t see much change.
“We’re in a period of weak inflation,” he said, but added that over the next year he expects to see inflation numbers go up as housing prices increase and drought conditions in California raise food prices.
Besides lackluster inflation, Thursday’s report should be encouraging.
“The overall trend is going to remain positive,” Dye said.