Income and Spending Rise Amid Tame Inflation

The Bureau of Economic Analysis reported this morning that, in September, Personal Income rose by 0.9% beating estimates of 0.4% and reversing the prior month’s swoon of 2.5%. Personal Spending rose by 1.4% and that beat the 1% that was forecast and also outperformed the prior month’s 1% rise. Inflation-adjusted Real Personal Spending rose by 1.2% versus an expected rise of 0.8%. The growth rate for August was 0.7%.

Another BEA report showed that inflation as measured by the Personal Consumption Expenditures Index rose by 0.2% last month as the year-over-year pace nudged up one-tenth to 1.4%. The prior month’s 1.4% was revised to 1.3% or no change would have occurred. Without food and energy, core PCE rose by 0.2% for the month as expected, and that pushed the year-over-year pace to 1.5%. The August core rate of 1.6% was revised to 1.4% while September’s expected 1.7% level was left unattained. Investors also learned this morning that the Employment Cost Index in Q3 grew at an unchanged pace of 0.5%, about what was expected. Later today, the University of Michigan will release its final October report for Consumer Sentiment.

Treasury prices are unchanged to up slightly, with the Ten-Year at 82 basis points, the Long Bond at 1.60% while the Two-Year rests at 15 basis points. Crude oil is little changed at $36.16 while gold’s $14 rally has taken that price to $1,881. Equity markets will probably open up in the red with outlooks dampened by news of European lockdowns and no stimulus in sight.