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     WASHINGTON (MNI) - The US Personal Income and Outlays report for August
will be released on Friday, with the median forecast among analysts in an MNI
survey calling for a 0.1% rise in the core PCE price index, a 0.4% gain in
personal income and a rise of 0.4% in current dollar PCE.
     Ahead of the release, we outline five themes for particular attention:
     --NO CORE PCE FORECAST RISK 
     This month, analysts are expecting core prices to rise 0.1%. Over the past
year, they have been very accurate in their estimate for the core PCE price
index. They have been on target for core prices seven times, underestimated
three times, and overestimated only twice. When analysts do miss, both their
overestimates and underestimates average 0.1pp, suggesting that if they miss in
either direction this month, it will likely be by a small amount. Because of
their history of accurately predicting core PCE, there is no clear risk for this
month's report.
     --POSSIBLE ENERGY PRICE REBOUND
     After two consecutive declines of 0.2% and 0.5% in June and July
respectively, the PCE Price Index for energy goods and services may be due for a
rebound in August. The Consumer Price Index for energy, which is a very reliable
correlate of the PCE Price Index for energy, rose 1.9% in August, suggesting a
rise for the PCE energy price measure. Additionally, because the PCE Price Index
for energy is known to be more volatile than the CPI for energy, the anticipated
gain in the PCE Price Index may be greater than the August CPI gain, which could
offset the recent losses.
     --CORE CPI SUGGESTS SOFT CORE PCE PRICES 
     Data released earlier this month by the BLS indicates that the core PCE
Price Index may come in soft in August. In August, core CPI rose only 0.1%,
which could indicate a modest gain for the core PCE Price Index. If core PCE
prices post a similar reading the August core CPI reading, it would push the
year over year rate up slightly to 1.98%, keeping the measure closely in line
with the Fed's inflation target. It should be noted, however, that the
correlation between the two indicators is cyclical, and has been weakening since
April.
     --SPENDING EXPECTATIONS MIXED
     In August, retail sales came in well below analysts' expectations. Based on
the soft 0.1% increase in August's retail sales report, spending on goods rose
by a relatively small amount. Additionally, the advance estimate for retail
sales points to a 0.8% decline in auto sales. Despite the dip in retail sales,
analysts are anticipating that a combination of lower taxes, strong consumer
confidence, and increasing income will fuel spending this month.
     --EARNINGS, PAYROLLS TO BOOST INCOME
     Data from August's nonfarm payrolls report suggest an increase in this
month's personal income. Average hourly earnings rose by 0.4% in August after a
0.3% gain in July, while payrolls rose 201,000. Even though the average workweek
was unchanged from July, the combination of the measures is a strong positive
sign for personal income.
--MNI Washington Bureau; +1 202-372-2121; email: shikha.dave@marketnews.com
--MNI Washington Bureau; +1 (973) 494-2611; email: harrison.clarke@marketnews.com
[TOPICS: MAUPR$,M$U$$$]