Trade Desk Thoughts - Personal Spending & Income

Core PCE Price Index (August) Actual 0.2%, Expected 0.2%, Previous 0.3%

Personal Spending (August) Actual 0.0%, Expected 0.2%, Previous 0.1% (Revised from 0.2%%)

Personal Income (August) Actual 0.5%, Expected 0.2%, Previous -0.6% (Revised from -0.7%)

Release Explanation: Core Personal Consumption Expenditures (PCE) measures price changes in Consumer goods and services excluding food and energy, and consists of the actual and imputed expenditures of households. It includes data pertaining to Durables, non-Durables, and Services. It is essentially a measure of goods and services targeted towards individuals and consumed by individuals, therefore it is very important in assessing the sentiment of the Consumer, especially in a Service based economy. This is a very important release.

The impact from this release affects the CPI, Retail Sales, Housing and Consumer Confidence numbers. This is released at the same time as Personal Spending and Personal Income reports, and all three complete a very strong picture of consumer sentiment. Named by the Federal Reserve as their preferred measure of near-term Inflation. A currency will be greatly impacted by this report as it reveals the strength of the public in their ability, or desire, to spend or save, and therefore how strong economic growth will be going forward. This report alos containes monthly data on incomes.

Trade Desk Thoughts: Compared with a year earlier, the PCE price index climbed 4.5% in August. The year-over-year climb in July was 4.6%. The core PCE index year over year climbed 2.6% in August, the highest since January 2005, after increasing 2.5% in July.

Disposable personal income (DPI), which is personal income less personal current taxes, decreased 0.9% in August, compared with a decrease of 1.5% in July. Real spending, taking price changes into account, increased less than 0.1% in August, in contrast to a decrease of 0.5% in July. Purchases of durable goods increased 1.6% in August, in contrast to a decrease of 3.2%, due to increased purchases of motor vehicles and parts. Purchases of nondurable goods decreased 0.3% in August, compared with a decrease of 0.7% in July. Purchases of services decreased 0.1%, in contrast to an increase of 0.1%.

"The flat consumer spending in August is a sign the economy will weaken in the second half of the year," said Matthew Carniol, chief currency strategist at TheLFB.com. "The Fed will remain concerned about the yearly rise in core PCE and the number is likely to keep them on hold despite the fact that Fed Funds Futures are indicating a high probability for a rate decrease at the October meeting."

Forex Technical Reaction: The dollar has been gaining on the euro and pound in overnight trading as S&P futures declined nearly 1.7%. Helping the dollar is the $5.30 drop in crude futures.

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