U.S. personal income rises sequentially in October, spending grows strongly

U.S. personal income rose sequentially in October, rising 0.5 percent and coming above consensus expectations of a rise of 0.4 percent. Personal spending rose strong by 0.6 percent. Prices rose 0.2 percent sequentially and rose 2 percent year-on-year. Core prices, excluding food and energy, rose 0.1 percent; however, it slowed on a year-on-year basis to 1.8 percent.

Removing price growth, real spending rose 0.4 percent in October. Strength in spending was broad based with services leading the way, followed by durable goods and non-durables. The personal saving rate dropped to 6.2 percent from an upwardly revised 6.3 percent in September.

Downward revisions to earlier months weaken the profile slightly; however, October’s solid growth leaves consumer spending in good stead for another 3 percent or more outturn in the fourth quarter of the year, noted TD Economics in a research report. The decline in gasoline prices will leave more in the tank for consumers to spend this holiday season, even as volatility in financial markets tempers some of this cheer.

The inflation reading in the report released today is as significant as the spending and income data. Inflation has done a whole lot of nothing in the past many months and October was no exception. Core price growth is averaging just 1.2 percent on a three-month-moving average basis.

“This should give the Federal Reserve pause. While it is likely not sufficient to stall a December rate hike, it certainly puts downside risks to the number of hikes in 2019”, added TD Economics.

At 14:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was neutral at 48.6738. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex