Personal Income And Outlays Not Showing Rising Pressure

The core PCE is the Fed's most important inflation reading and it is not showing rising pressure, coming in unchanged in October, vs an expected gain of 0.2 percent, with the year-on-year rate at 1.3 percent which is also unchanged. Consumer spending also proved soft, up only 0.1 percent vs expectations for a 0.3 percent gain. Spending shows flat readings across categories including only a small gain for services which usually are strong. The income side is better, hitting expectations at a 0.4 percent gain with wages & salaries showing an outsized gain of 0.6 percent. And the outlook for future spending is solid with a strong 3 tenths rise in the savings rate to 5.6 percent. Though income does point to consumer strength ahead, the spending data are not a strong start at all for the fourth quarter. These results will not lift the odds for a December rate hike.

Recent History Of This Indicator:
The core PCE price index is the Fed's favorite inflation reading and Econoday expectations are calling for a 0.2 percent gain in October in what would be substantial enough to further build expectations for a December rate hike. Readings on personal income and personal spending are also expected to rise, at respective consensus forecasts of plus 0.4 percent for the former, reflecting wage and workweek gains in the October employment report, and plus 0.3 percent for the latter in what, combined with steady incremental gains in service spending, would be in line with gains for core retail sales.