Instant view: Reaction to U.S. personal income data

NEW YORK (BestGrowthStock) – U.S. consumer spending rose by less than expected in September as income fell for the first time in 14 months, while inflation remained muted, according to a government report on Monday that reinforced expectations of more monetary stimulus from the Federal Reserve this week.

KEY POINTS: * The Commerce Department said spending rose 0.2 percent after rising by an upwardly revised 0.5 in August. * Analysts polled by Reuters had forecast spending, which accounts for about 70 percent of U.S. economic activity, rising 0.4 percent in September from a previously reported 0.4 percent in August.

COMMENTS:

JOSEPH TREVISANI, CHIEF MARKET ANALYST, FX SOLUTIONS, SADDLE RIVER, NEW JERSEY:

“The Fed’s focus on inflation and quantitative easing was reflected by today’s PCE deflator number which continues to head down to historical lows.”

KIM RUPERT, MANAGING DIRECTOR OF GLOBAL FIXED INCOME ANALYSIS, ACTION ECONOMICS, SAN FRANCISCO:

“They were a little below forecast, but it doesn’t seem to be impacting the market a whole lot. Nevertheless we have seen a little bullish bias in Treasuries and the data do support that. We are still seeing a little bit of buying — we saw some demand come in when the 10-year yield poked above 2.60 (percent) and the bond pressed against 4.00 percent.”

SUBODH KUMAR, CHIEF INVESTMENT STRATEGIST, SUBODH KUMAR & ASSOCIATES, TORONTO:

“The spending side was up a little bit which was somewhat encouraging.

“Income growth being low and the election and the Fed meeting are going to keep the (stock) market overall quite flat-ish.

“I don’t think the early signs that the market will go up will hold in the end.”

DAVID ADER, HEAD OF GOVERNMENT BOND STRATEGY, CRT CAPITAL GROUP, STAMFORD, CONNECTICUT:

“A very friendly report with a drop in inflation and very tame wage gains with disposable income actually down. The weak wage gains and drop in transfer payments from government explains the weaker-than-expected spending and the fact that spending had to come from reduced savings. This bodes for tame spending going forward. Note this data was incorporated in the Q3 GDP on Friday, but underscores the momentum loss as the quarter concluded. The drop in unemployment payments is the only silver lining to the cloud as it suggests new people are not entering the unemployment ranks, but the current unemployed losing benefits.

“The bond market is firmer on the back of this, but not by much, with 10s a marginally better performer.”

MARKET REACTION: STOCKS: U.S. stock index futures briefly trim gains after the income data. BONDS: U.S. Treasury debt prices extend gains.. DOLLAR: U.S. dollar shows little reaction.

Instant view: Reaction to U.S. personal income data