U.S. personal income rises slightly below expectations in August, consumer spending likely to grow in Q3

U.S. personal income rose slightly below market expectations in August. Personal income was up 0.3 percent, as compared with market expectations of 0.4 percent. Adjusted for inflation and removing taxes, real disposable income rose slightly by 0.1 percent in the month. Personal spending also rose 0.3 percent in nominal terms, in line with consensus estimate. In real terms, spending rose 0.2 percent, led by non-durable spending. Both durables and services came in at a strong 0.2 percent.

The headline PCE price index rose 0.1 percent in August, while the core measure came in flat in the month. On a year-on-year basis, headline inflation dropped 2.2 percent, but the core measure remained at 2 percent.

According to a TD Economics research report, consumer spending is expected to grow by more than 3 percent in the third quarter and continue to be a backbone of economic growth. Beyond that, spending growth is likely to decelerate slightly as the boost from tax cuts fades. Core inflation is at the Fed’s target, but shows few signs of breaking out much above it.

“We continue to watch for signs of tariff impacts creeping into price growth, but so far evidence is relatively scant, an outcome we attribute to the buoyant U.S. dollar”, added TD Economics.

At 14:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was bullish at 26.3115. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex