In this morning’s data, Personal Income increased 0.3% in August, as expected and Personal Spending increased 0.4% in August, more than expected. Real Personal Spending, which accounts for inflation, was up only 0.1% in August as expected. However, both headline and real personal spending figures were revised lower to negative levels in the previous month. Looking at inflation, the PCE Deflator increased in August by 0.3% and 6.2% on an annual basis, more than expected. The Core PCE Deflator, which excludes food and energy prices, grew 0.6% in August and 4.9% on an annual basis, again more than expected.
Overall, increases in income and spending for August with last month’s figures for spending revised lower. The revisions and nearly flat levels of real spending suggest consumers are reticent to spend as high prices and recession concerns are likely weighing on behavior. Meanwhile, inflation remains well above levels that the Federal Reserve considers appropriate for the economy. With a resilient labor market, as jobless claims fell below 200k in yesterday’s reading, the Federal Reserve has their complete focus on tightening financial conditions through interest rate increases and balance sheet reductions to ensure that inflation is snuffed out in the months ahead, even if that leads to a slowing economy.
In all, the 10-year US Treasury yield is little-changed and equity futures are higher as we head into the market open.
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