Personal Income And Outlays Modest-To-Moderate

The refrain of "strong" throughout the FOMC's assessment of the economy on Wednesday isn't confirmed by the personal income and outlays report for August where modest-to-moderate is the better description. And for prices, the word subdued may be an overstatement. Personal income rose only 0.3 percent in August which misses Econoday's consensus by 1 tenth while consumer spending also rose 0.3 percent to hit expectations.

On inflation, the PCE price index inched only 0.1 percent higher with, more importantly, the core unchanged to miss expectations. This is the lowest result for the core since March last year. Year-on-year inflation is 2.2 percent overall, again missing Econoday's consensus, with the core coming in as expected and on the Fed's target at 2.0 percent.

Income was held down in August by a decline in interest income and only a marginal gain in dividend income. This masks the most solid news in the report which is a 0.5 percent rise in wages. With inflation and taxes included, income rose 0.2 percent. The savings rate is unchanged at 6.6 percent.

Spending was held down by a 0.1 percent decline on durable goods which reflects weakness in vehicle sales. Spending on nondurable goods, reflecting high energy prices, rose 0.5 percent with spending on services, the dominant category, up a respectable 0.4 percent for a second straight month. When including inflation, which is how GDP is calculated, spending rose a modest 0.2 percent.

This is not a report that speaks to runaway growth and will offer critics of Fed policy something to cite in their arguments.