Personal Income And Outlays Report Shows Very Quiet Inflation Readings

There's no hurry for a rate hike based on the July personal income and outlays report where inflation readings are very quiet. Core PCE prices rose only 0.1 percent in the month with the year-on-year rate moving backwards, not forwards, to a very quiet plus 1.2 percent. Total prices are also quiet, also at plus 0.1 percent for the monthly rate and at only plus 0.3 percent the yearly rate. On the consumer, the data are very solid led by a 0.4 percent rise in income that includes a 0.5 percent rise in wages & salaries which is the largest since November last year. Other income details, led by transfer receipts, also gained in the month. Spending rose 0.3 percent led by a 1.1 gain in durables that's tied to vehicle sales. The savings rate is also healthy, up 2 tenths to 4.9 percent. The growth side of this report is very favorable and marks a good beginning for the third quarter. This at the same time that inflation pressures remain stubbornly dormant. And remember this report next month will reflect the August downturn in fuel prices. With the core PCE index out of the way, next week's August employment report looks to be the last big question mark going into the September 17 FOMC.

Recent History Of This Indicator: The core PCE price index for July will be the last before the next FOMC, and another benign result, which is expected at plus 0.1 percent, could kill off remaining expectations for a September rate hike. Personal income and consumer spending are both expected to post solid gains of 0.4 percent in what would underscore the strength of the domestic consumer.