Data released on Friday in the United States showed an increase in Real Personal Spending and higher inflation numbers. Analysts at Wells Fargo point out that a clean read on January income is tough. They argue that while a jump in wages is supportive of spending, it's a challenge for the Federal Reserve if it keeps the heat on inflation.

Signs of resilience beneath volatility

“Real personal spending got a lift again to start the year, and in jumping 1.1% in January, growth more than offset weakness at year-end. A blow-out January retail sales report pointed to scope for a rebound to start the year at least in terms of goods outlays.”

“We anticipate durables strength is due more to monthly volatility than a renewed interest in goods outlays by consumers.”

“The sustained strength in real personal income is a mixed blessing. While it could provide a path to the elusive soft landing by supporting consumer spending more sustainably than reduced savings or reliance on more costly credit cards; it could also point to slower declines in services inflation which could compel the Fed to go higher for longer.”

“The core PCE deflator rose 0.6% and demonstrates the road to 2% inflation will be bumpy.”