INFLATION
The core personal consumption expenditures (PCE) Index, the Fed’s preferred measure of inflation, rose 0.3% in January and is up 2.6% over the last twelve months.
Our Take: The year-over-year core PCE fell from 2.9% in December to 2.6% in January, edging closer to the Fed’s 2% target. Despite the improvement, the Fed will likely continue to hold rates at their current level until further progress is made or the economy meaningfully slows.
PERSONAL INCOME AND SPENDING
Personal income rose 0.9% in January, while personal spending fell 0.2%.
Our Take: January inflation adjusted consumer spending fell 0.5%, considerably worse than expected. Consumers are the engine that drives the U.S. economy. The big question surrounding this month’s report is whether the decline was due to extreme winter weather or if the consumer is pulling back.
MUNICIPALS
Florida Governor Ron DeSantis announced that he would support a plan to eliminate property taxes. Desantis stated “property tax says that you never really own your property because you have to pay rent to the government.” DeSantis said in a news conference this week that rising home prices have led to increased property taxes, which make it hard on senior citizens living on a fixed income. No formal proposal or amendment has been introduced.
Our Take: Abolishing property taxes would require a constitutional amendment with 60% of voters approving the measure. Estimates show that if property taxes were eliminated, $43 billion would need to be raised statewide to maintain the current level of services. Property taxes fund schools and essential services. Should property tax revenue disappear, municipalities would have to explore other funding sources, which would likely lead to an increase in other taxes such as sales tax and tourism taxes.