Personal Income: Slower Spending But Trend Still On Track

Bottom Line: Core PCE, the Fed's preferred inflation metric, was nearly flat in September, just 1.6% annualized in the last 3 months and 1.7% over the last 12 months. Real consumer spending was in-line with expectations and nearly in-line with August. The Q3 spending average was 2.9% annualized above its Q2 level. Income gains remained modest to moderate with both personal income and disposable income showing slowing gains in September after stronger August gains. Overall, income growth should continue to fuel modest to moderate consumption growth over the medium-term. Personal Income ROSE by 0.3% in September, compared with market expectations for an increase of 0.3%. The prior month was revised higher from 0.39% to 0.47%. Personal Income is now 4.9% ABOVE its year ago level. Wages and Salaries were nearly UNCHANGED, Wages are now 5.2% ABOVE year ago levels. Personal Tax Payments FELL by 0.3% and are now 5.3% ABOVE their year ago level, reflecting the year-on-year changes in employment and income. Disposable Income ROSE by 0.3% and is now 4.9% ABOVE its year ago level. There were small increases in durable goods, small decline in nondurable goods spending and small increases in services spending. Spending is now 3.9% ABOVE its year ago level. The Saving Rate ROSE by 0.20 points to 8.3%. The PCE Price Index was nearly UNCHANGED and is now 1.3% ABOVE its year ago level. Meanwhile, the Core PCE Index was UNCHANGED and is now 1.7% ABOVE its year ago level. Real Consumer Spending ROSE by 0.17% and is now 2.6% ABOVE its year ago level. The Q3 spending average was 2.9% annualized above its Q2 level.