WASHINGTON — Personal income rose 0.4% in October, compared with a 0.3% gain expected. At the same time, nominal PCE was up 0.3%, as expected.
The core PCE price index rose 0.2% in October following an upward revised 0.2% gain in September. That upward adjustment in September put the year/year rate at 1.4%, where it stayed in October. Although below the 2% Fed inflation target, it is likely high enough to support a December rate hike.
With core prices starting to creep up and initial claims for unemployment hovering marginally above decades-low levels, the FOMC will have much to discuss at its December meeting.
Durable goods spending fell by 0.1% after a 2.9% jump in September, as the hurricane effects on vehicle sales diminished. Nondurable goods spending rose 0.2%, while services spending was up 0.3%.
For income, there were gains reported for all of the major categories, though with a slower pace of growth for proprietors' income and transfer receipts. Wages and salaries rose 0.3% despite the flat reading for hourly earnings.
Disposable personal income rose 0.5% in the month, strongest gain since February, while real disposable income was up 0.3%. The saving rate partially rebounded to 3.2% in October from 3.0% in September, which was the lowest point since December 2007.
The overall PCE price index was up only 0.1% in October following a 0.4% gain in September. The year/year pace slowed to 1.6% from 1.7% in the previous month, but remained above the 1.4% year/year gains seen in June, July, and August.
Real PCE rose 0.1% in October following a 0.5% gain in September. After inflation adjustment, durable goods PCE were still down 0.1%, while nondurable goods PCE rose 0.5% and services PCE was flat.
The October real PCE level was up only 1.7% at an annual rate from the third quarter average. Real PCE was up 2.3% in third quarter based on the GDP data released Wednesday, so the fourth quarter did not start out solidly despite the strong lead in from September.
