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Apparently Money Really Does Grow On Trees!


Distortions from March’s helicopter money drop continue to cloud the forecast horizon. In nominal terms, income fell -13% M/M in April. This shouldn’t have been a surprise given that the free money raised March’s nominal income by 21%! Another distortion appeared in core PCE (Personal Consumption Expenditure) prices (the price index most watched by the Fed). It rose +0.7% in April, mainly on the back of reopening (rising prices of air fares, hotels, used cars).  Still, Y/Y, this index stands at a not so scary 3.1%. Truth be told, this is likely to get somewhat worse before it gets better.

April’s nominal growth rate in consumption was +0.5% M/M, but when rising prices are factored, in real terms, consumption fell -0.1%. Here’s the kicker – something we’ve discussed in several prior blogs: services spending did rise +0.6% (actually a disappointment given…

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