US events and data reviewed – Nomura

Analysts at Nomura explained that the Democrats are likely to take control of the House and Republicans are likely to retain control of the Senate and also noted the most recent data.

Key Quotes:

US midterm election update:

With eight days till the 2018 US midterm elections, the basic outlook has changed little. A variety of factors – public polling, fund raising, early voting and expert opinion – still suggest that Democrats are likely to take control of the House and Republicans are likely to retain control of the Senate.

Personal income and spending:

“Personal spending increased 0.4% m-o-m in September (Nomura: 0.2%, Consensus: 0.4%), following an upwardly revised 0.5% increase in August. Spending on durable and nondurable goods accelerated. Durable goods purchase was boosted by a surge in outlays on motor vehicles and recreational goods, which could revert in coming months. Service spending growth slowed somewhat in September, but is likely attributable to a transitory decline in spending on food and accommodation services which are sensitive to adverse weather conditions. The healthy advance in September with an upward revision to August points to elevated momentum heading into Q4. The healthy labor market and continued boost from tax cuts will likely support consumer spending in Q4. Personal income rose 0.2% m-o-m in September. Albeit slightly weaker than previous months, the gain in September appears steady.”

PCE deflators:  

“Core PCE inflation came in line with our expectations. Excluding food and energy, core PCE inflation rose by 0.153% m-o-m in September, close to our expectation of 0.155% but slightly higher than the market consensus of 0.1%. Given that there were only small backward revisions to prior months, y-o-y change of core PCE price index also came in line with our forecast as it increased by 1.966% from a year earlier compared with our expectation of 1.965% (Consensus: 2.0%). Inflation of most major components remained moderate. However, as we had expected, air transportation prices jumped 5.6% m-o-m, offsetting the weakness from others. Overall, today’s report reinforces our medium-term inflation outlook that core PCE inflation will pick up only gradually in coming years.”