U.S. headline PCE inflation likely to have dropped marginally in October

The headline PCE inflation of the U.S. is likely to have dropped marginally in the month of October. According to a TD Economics research report, the PCE inflation is expected to have dropped marginally to 1.5 percent, reflecting a 0.1 percent rise in prices sequentially.

Some giveback from prices of gasoline, which rose sharply after the hurricanes, is the main source of the slowdown. Food prices are also likely to have flattened for the third month, which will keep prices slightly changed on a year-on-year basis. Stripping food and energy, core PCE inflation is expected to have strengthened to 1.4 percent year-on-year on a 0.2 percent sequential rise, stated TD Economics.

But the unrounded sequential rise is expected to be weaker than that seen in the CPI release. Meanwhile, nominal PCE is likely to have risen 0.3 percent in October. This shows a strong footing for real spending, which is tracking well above a 2 percent rate for the fourth quarter. Gains are likely to have been driven by nondurables and services, with a modest drag from vehicle sales.

“We also expect a firmer 0.4 percent increase in October personal income, leading the personal savings rate marginally higher”, added TD Economics.

At 20:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was neutral at 5.44029. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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