Consumer spending registered the strongest gain in more than eight years with a 1.0% jump in September partly supported by the households in Texas and Florida replaced flood-damaged motor vehicles. Personal income rose 0.4% in September.

Despite strong consumer spending and gain in personal income, the underlying inflation remained muted with core-PCE which excludes food and energy grew 0.1%m/m in September, the same pace for five straight months. On y/y, PCE rose 1.3%, undershot the Fed's 2% target for nearly 5-1/2 years. We reiterate our view for a December rate hike by the Fed and not in October/November meeting.

• Consumer spending registered the strongest gain in more than eight years. It jumped by 1.0% in September from 0.1% in August partly supported by the households in Texas and Florida replaced flood-damaged motor vehicles.

• Personal income rose 0.4% in September after increasing 0.2% in August. Savings fell to $441.9bil in September from $521.4bil in August.

• Despite strong consumer spending and gain in personal income, we found the underlying inflation remained muted. The core personal consumption expenditures (PCE) which excludes food and energy, a preferred measure by the US Fed grew 0.1%m/m in September. The core-PCE has been growing at this pace for five straight months.

• On y/y, the PCE gained by 1.3%, the same pace as in August. It has undershot the Fed's 2% target for nearly 5-1/2 years. We reiterate our view for a December rate hike by the Fed and not in October/November meeting.

Source: AmInvest Research - 31 Oct 2017