In this morning’s data, Personal Income increased 0.3% in December, less than expected, and Personal Spending decreased -0.6% in December, as expected. Meanwhile, the PCE Deflator, a key measure of inflation monitored by the Federal Reserve, remains elevated increasing 5.8% on an annual basis. The Core PCE Deflator, which excludes food and energy prices, also remains elevated growing 4.9% on an annual basis, slightly higher than expected. Overall, an increase in income with a decline in spending, amidst high inflationary measures. Consumers may be reticent to make purchases given higher prices, a dynamic that could reduce economic growth from the real, annualized 6.9% increase in the fourth quarter of last year. Real figures account for inflation, while nominal figures do not. The Federal Reserve has adjusted their policy in light of inflationary pressures by working to end their asset purchase program, planning to increase rates starting this year, and even possibly reducing their balance sheet in the background as maturities occur. How companies handle these adjustments, including higher prices and costs, will be key issues throughout the rest of earnings season and this year. In all, the 10-year US Treasury yield ticks higher and equity futures are lower as we head into the market open.
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