MNI 5 THINGS: US Core Prices Seen +0.1%;No Clear Forecast Risk

     WASHINGTON (MNI) - The US Personal Income and Outlays report for October

will be released on Thursday, 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 0.5% in current dollar PCE.

     Ahead of the release, we outline five themes for particular attention:

     --NO CORE CPI FORECAST RISK

     This month, analysts are anticipating core prices to rise by 0.1. Over the

last year, analysts have shown a clear tendency to be on target in their

estimate for core prices, having accurately forecast the value six times. The

remaining six months have an even split between overestimates and

underestimates, both averaging just 0.1pp. This suggests that not only is there

no clear risk for analysts' expectation of a 0.1% gain, a potential miss in

either direction is likely to be very small.

     --JOBS DATA GOOD FOR PERSONAL INCOME

     Personal income is expected to post a solid 0.4% gain this month. October's

employment report, released earlier in the month, suggests that personal income

is likely to increase in line with analysts' expectations. Payrolls rose by a

very strong 250,000. This increase, combined with the steady 0.2% rise in

average hourly earnings and average weekly hours from 34.4 in September to 34.5

in October, suggests a positive outlook for this month's personal income growth.

     --PCE LIFTED BY RETAIL SALES

     Personal spending is forecast to rise by 0.5% in October after a 0.4% gain

in September. Total retail sales were up 0.8% in the month, and still up 0.7%

excluding motor vehicle sales, above analysts' expectations. This increase in

consumption was driven by gains in the core retail categories, which flow

directly into personal consumption and were up 0.3% in the month. Additionally,

this rebound offset September's weaker than expected retail sales report. As a

result, analysts are expecting October's personal spending to continue its

strong upward trend.

     --CORE CPI SUGGESTS CORE PCE PRICE RISE

     In October, the core Consumer Price Index posted a 0.2% gain, following

softer gains in the prior month. This figure lends weight to the analyst

projection for a 0.1% gain in core PCE prices, as the two indicators are

moderately correlated. If the core PCE Price Index were to match the gain made

by the core CPI, it would lower the year over year rate of inflation to 1.9%

after holding steady at 2.0% after rounding since May.

     --CPI ENERGY ADDS TO ENERGY PCE PRICES

     The Consumer Price Index for energy posted a 2.4% gain in October,

supporting the analyst projection for a 0.5% gain in headline personal

consumption expenditures. Additionally, the PCE Price Index for energy is also

highly likely to post a similar gain, as it moves nearly in lockstep with the

CPI for energy. Although historically the PCE Price Index for energy has been a

more volatile indicator than the CPI for energy, the convergence of the two has

been apparent and consistent since January and has not broken since.

--MNI Washington Bureau; tel: +1 202-371-2121; email: kevin.kastner@marketnews.com

--MNI Washington Bureau; +1 (973) 494-2611; email: harrison.clarke@marketnews.com

--MNI Washington Bureau; +1 202-371-2121; email: shikha.dave@marketnews.com

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