Personal Income Surges, Personal Spending and Inflation Decelerate

- Personal Income for September rose .5% versus estimates of a .3% gain and an upwardly revised .4% increase in August.
- Personal Spending for September rose .1% versus estimates of a .2% increase and an upwardly revised .2% gain in August.
- PCE Core for September rose .2% versus estimates of a .2% increase and an upwardly revised .3% increase in August.

BOTTOM LINE: Personal spending in the US rose last month and Americans’ incomes increased by the most in three months, suggesting the economy ended the third quarter on a strong note, Bloomberg reported. Job growth and falling fuel prices are helping soften the effects of a slowing housing market. Disposable income, the money left over after taxes, rose 5.9% from year ago levels. Taking into account price changes, spending rose .4% in September. Inflation-adjusted spending on durable goods, such as furniture and autos, rose 2.1% versus a 1.5% decline the prior month. The average price of regular unleaded gas fell to $2.53 in Sept. from $2.95/gallon in August. Workers’ average hourly earnings, adjusted for inflation, rose the most since 1998 in September. Rising wages, decelerating inflation, a rising stock market and low interest rates are spurring the recent jump in consumer sentiment. I expect personal spending and income growth to remain healthy over the intermediate-term, while measures of inflation continue to decelerate.