Announced this morning, Personal Income increased 0.4% in September, as expected. Personal Spending increased 0.6% in September, two-tenths more than expected and Real Personal Spending which accounts for inflation was up 0.3% in September also more than expected. The personal savings rate as a percentage of disposable income was 3.1% in September, which compares to 3.5% the previous month.
Looking at inflation, the PCE Deflator increased 0.3% in September as expected and grew 6.2% on an annual basis. The Core PCE Deflator, which excludes food and energy prices, grew 0.5% in September and 5.1% on an annual basis, which was slightly less than expected but the annual figure was still higher than the previous month. Finally, the Employment Cost Index rose 1.2% in the third quarter, slightly lower than the elevated figure in the previous period.
Overall, the consumer is hanging in there with increases in income and spending in September, including a rise in real personal spending that accounts for inflation. Personal savings are also positive but trending lower. Meanwhile, inflation measures remain elevated, including employment costs which highlight the resilience in the labor market. Coupled with yesterday’s announcement of a stronger than expected GDP report for the third quarter, the Federal Reserve is likely to continue tightening monetary policy in the coming weeks. The timing and magnitude of how these policy actions impact inflation versus the consumer will be a key dynamic for the economy in the months ahead.
In all, the 10-year US Treasury yield ticks higher and equity futures are mixed as we head into the market open.
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