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US data released today showed that personal income increased 0.5% and personal spending 0.6% in October. Analysts at Wells Fargo, explained that a downward revision on the spending side to prior data takes some shine off the apple. They also warn about recent jobless claims numbers.  

Key Quotes:  

“Personal income shot up 0.5% in October””a quickening from the more modest 0.2% increase the prior month and the latest affirmation that a tight labor market is finally translating into meaningful income gains. It was a good number for consumer outlays as well. Spending increased 0.6% in the month, although the prior month’s increase was revised lower. Still, on balance the takeaway of today’s personal income and spending report is that as consumers headed into the crucial holiday shopping season, the wind was at their backs with confidence high, incomes rising and a pace of outlays that augers well for our forecast for a rate of consumer spending growth of
about 3.0% in the fourth quarter.”

“Digging into the details we find the fastest category of income growth was proprietor’s income, but worth noting is that without exception, every category of personal income improved in the month. That includes the largest category, wages and salaries, which after a solid 0.3% monthly pick up puts the year-over-year rate of growth at 4.4%.”

“The PCE deflator was unchanged at 2.0% giving the Fed cover to go ahead with another rate hike at its December 13 meeting.”

“In a separate release this morning, the Department of Labor reported its weekly snapshot of initial claims for unemployment insurance””a vitalleading indicator for the broader economy. Claims jumped to a four month high of 234K. One month does not a trend make, but to the extent that consumers are beginning to bank on rising wages and salaries, any cracks in the labor situation could raise doubts about future spending.”