FXStreet (Córdoba) – Eugenio Alemán and Michael Brown, economists at Wells Fargo, analyzed the Personal Income and Personal Spending report and pointed toward the weak performance in wage and salaries as the most important factor keeping the Federal Reserve away from starting the normalization process
Key Quotes:
“Not surprising after yesterday’s GDP report, income and expenditures growth ended the third quarter on a weaker note, both increasing 0.1 percent in September. However, income growth was revised up in August.”
“Although the recent weakness in hiring could have contributed to the weak performance of wages and salaries in September, the most important missing link that remains in this recovery is pressure on wages and salaries that would reflect the low unemployment rate. Perhaps this is the most important factor keeping the Federal Reserve from starting its interest rate normalization campaign. This result is certainly not going to help those who think that the Fed is well overdue to raise rates and will tend to support the dovish argument of waiting longer.”
“Inflation remains well contained with September’s PCE deflator dropping 0.1 percent while the core PCE was lower-than-expected at 0.1 percent. Adding this information to the fact that credit card borrowing has continued to improve, we expect relatively strong and sustained consumption growth going forward.”
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