Personal Income And Spending Rises Slightly

Core inflation remains lifeless in an unwanted highlight of an otherwise solid income and spending report. Personal income rose 0.4 percent in September and was underpinned by wages & salaries which also rose 0.4 percent. Consumer spending jumped 1.0 percent driven by a 2.1 percent surge in durable goods that was tied to vehicle replacement following Hurricanes Harvey and Irma.

But the rise in income and spending didn't heat up ex-food ex-gas core inflation which posted a marginal 0.1 percent gain. This is the 5th straight 0.1 percent gain for this key reading. The core's year-on-year rate has been stuck at a rock bottom 1.3 percent for the last two months. Total inflation, reflecting a hurricane-related gain for energy prices, rose 0.4 percent with this year-on-year rate rising 2 tenths to 1.6 percent.

But the pressure on energy prices has already faded and unless wage pressures can extend their emerging gains, inflation readings are not going to be climbing in the direction of the Federal Reserve 2 percent goal. Also helping spending in September was a sharp 5 tenths decline in the savings rate to 3.1 percent and a 10-year low in what, however, is likely to be another hurricane effect that will be quickly reversed.

Recent History Of This Indicator:
Income and especially spending are expected to show life in September but not the Federal Reserve's core price index which is expected to remain flat. Personal income is seen is rising 0.4 percent in September vs August's 0.2 percent gain while consumer spending, reflecting September's post-hurricane surge in auto sales, is expected to jump 0.9 percent vs August's 0.1 percent rise. The PCE price index is expected to rise 0.4 percent for a year-on-year rate of 1.7 percent but the core rate, which excludes both food and energy, is seen up only 0.1 percent for a year-on-year rate stuck at 1.3 percent.