After seeing the upside surprise in the personal spending component in Q3 GDP on Friday, the actual Sept reading was below estimates which means Friday’s figure will likely be revised a touch lower. Sept spending rose .2% vs the forecast of .4% but Aug was revised up by .1%. Because the headline PCE inflation figure rose .1%, REAL spending was just .1%. Income unexpectedly fell by .1% from a sharp .4% gain in Aug but the BEA said the decline “reflects provisions of unemployment compensation legislation, which had boosted the emergency gov’t unemployment benefits in Aug.” Ex these transfer payments, income rose .1% in Sept following a .3% rise in Aug. The Savings Rate fell for a 3rd month to 5.3%, a 6 month low. In terms of driving a sustainable gain in spending it all comes down to jobs and income growth as the access to credit is certainly not what it used to be. In terms market reaction, most of this news was out on Friday.

Category: MacroNotes

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