In this morning’s data, Personal Income grew 0.2% in October, as expected. Personal Spending also grew 0.2% in October, as expected and markedly lower than the previous month. Real Personal Spending, which accounts for inflation, increased 0.2% in October, which is a bit higher than expected. Meanwhile, the personal savings rate as a percentage of disposable income was 3.8%, a slight increase from the 3.7% measure in September.
Looking at inflation, the PCE Deflator was flat in October, less than expected and increased by 3.0% on an annual basis. The Core PCE Deflator, which excludes food and energy prices and is closely monitored by the Federal Reserve, increased 0.2% in October, as expected. Core rates grew 3.5% on an annual basis, a decrease of two-tenths from the previous month.
Overall, both personal income and spending increased slightly in October, coupled with a slight increase in the savings rate. Consumers are still present, but their spending levels are moderating from earlier in the year. Recent earnings reports from retailers highlight consumers who are becoming more choosey with what they are buying. Meanwhile, the PCE data points show disinflation is present, but core measures remain well above the Federal Reserve’s 2% annual target. The mantra of higher rates for longer remains in effect. Amidst these dynamics, how the Federal Reserve navigates its policy will be closely watched for the direction of the economy and markets in the coming months.
In all, the 10-year US Treasury yield ticks higher following the data and equity futures are also higher as we head into the market open.
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