Vital Signs: Betting on Lower Rates

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MEETINGS OF NOTE

Friday, Mar. 30, 8:30 a.m. EDT - Federal Reserve Bank of Philadelphia President Charles Plosser makes the opening remarks at a community affairs research conference in Washington, D.C.

12 p.m. EDT - Federal Reserve Board Chairman Ben Bernanke speaks at a community affairs meeting in Washington. D.C.

PERSONAL INCOME AND CONSUMER SPENDING - Friday, Mar. 30, 8:30 a.m. EDT

Personal income probably improved a bit more in February. Overall income growth was 1% in January, after a 0.5% rise in December. The recent strength in personal income has been centered in wage and salary gains. The rise of wages and salaries was 1.2% in January. Compared to the same period a year ago, January personal income was up 5.3%, while wages and salaries were 5% higher. The solid income gains are helping to sustain consumer spending in the face of a housing recession.

Consumer spending probably kept growing at a solid pace, after registering a 0.5% gain in January, and a 0.7% jump in December. Risks to February consumption include the rebound in gasoline prices and inclement weather. On a yearly basis, December spending was up 5.5%, from 5.9% in December.

The personal consumption expenditures (PCE) price index ticked up 0.2% in January, after a 0.3% increase in December. Another increase in energy prices will help push the headline reading higher in February. The slower pace of price gains in January left the yearly inflation rate at 2%, from 2.3% in December. Less food and energy, monthly prices were up by 0.3% in January, after 0.1% gains in the prior two months. The yearly pace of core inflation was 2.3%, from 2.2% in December.

The core PCE price index is the preferred inflation gauge of the Federal Reserve and the central bank's comfort level for this price index is 1% to 2%.

CONSTRUCTION SPENDING - Friday, Mar. 30, 10 a.m. EDT

Construction outlays probably held steady in February. Spending dropped 0.8% in January as private residential construction continued to collapse. Residential construction outlays fell 1.8% in January, after a 1% drop in December. The change from a year ago for private residential construction is 13%. The change in overall construction spending is off just 1.2% from a year ago.

Growth in non-residential construction continues to do a good job of offsetting the housing recession. Non-residential outlays were unchanged in January, after rising 2.3% in December, and are up 14.7% from a year ago. Government construction spending has also held up well, up 0.6% in January and 12% from a year ago.

CHICAGO PURCHASING MANAGERS SURVEY - Friday, Mar. 30, 10 a.m. EDT

The Chicago-area purchasing managers' March index of industrial activity probably improved a little. The index started the year inauspiciously, easing to 47.9% in February, from 48.8% in January, and 51.6% in December. The January result was the first under 50% since the spring of 2003. A reading below 50% indicates activity is contracting within the region.

The production index cooled off a little to 51.2% in February, from 53.2% in January, but remained above the recent trough of 49.7% in December. The new orders reading was a little better in February, but at 48.7% it still implies an overall easing in orders. One of the few bright spots in the February report was the employment index, which rebounded to 50.6%, from 42.8% in January.

CONSUMER SENTIMENT INDEX - Friday, Mar. 30, 10 a.m. EDT

The University of Michigan and Reuters will report the final reading of consumer sentiment for February. The index probably held fairly steady, after slipping to 88.8 in the initial March reading, from 91.3 in February, and 96.9 in January.

Consumers in March turned less positive about their current financial position, with the index falling to 103.6, from a final February level of 106.7. The economic outlook for the coming year was also less upbeat. Some of the latest slide in results is tied to losses in the more volatile equity markets. The University of Michigan/Reuters survey places more emphasis on financial market conditions. The Conference Board survey stresses labor market conditions.

MEETING OF NOTE

Saturday, Mar. 31 - U.S. President George W. Bush meets with Brazil President Luiz Inacio "Lula" da Silva to discuss economic issues and alternative energy at Camp David, Maryland.

Mehring is economics writer for BusinessWeek .