U.S. personal income rises slightly above expectations in October, spending rises 0.3 pct

Personal income in the U.S. rose in October, coming in slightly above the consensus expectations. On a sequential basis, personal income rose 0.4 percent in the month, as compared with the consensus expectations of 0.3 percent. Real disposable personal income was up 0.3 percent sequentially.

Meanwhile, personal spending was up 0.3 percent in nominal terms, consistent with expectations. Spending rose a soft 0.1 percent in real terms after September’s robust but downwardly revised 0.5 percent rise. Component wise, real spending on non-durable goods drove the headline figure, rising 0.5 percent, but durable goods dropped 0.1 percent and services spending remained flat on the month.

Prices were up 0.1 percent sequentially in the month, while on a year-on-year basis inflation pulled back to 1.6 percent from September’s 1.7 percent. Core prices were up 0.2 percent sequentially; however, core inflation remained the same at an upwardly revised rate of 1.4 percent. The personal saving rate rose slightly to 3.2 percent from 3 percent in September.

Some slowdown was expected in spending growth as spending normalized after the volatility created by hurricanes. Still, the downward revision to September’s data along with weaker than expected durable goods spending in October implies some downward risk to expectations for fourth quarter consumer spending growth and thus wider economic growth, stated TD Economics in a research report.

Given the upward revision to the third quarter economic growth, there is little reason to fear a modest slowdown in economic growth. Inflation continues to be below the Fed’s target rate; however it seems to be slowly picking up speed. On a year-on-year basis, core prices rose 2.5 percent in October.

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