MNI DATA PREVIEW: Core PCE Prices To Stay Soft, +0.1% Again

By Holly Stokes

HIGHLIGHTS

-Personal income to grow 0.4%, as indicated by September aggregate weekly

payrolls data.

-Current dollar PCE to rebound 0.9%, highest pace in almost eight years, due to

hurricane-driven vehicle replacement and surge in gas prices.

-Core PCE to post 0.1% gain for fifth month in row - keeping year over year rate

at 1.3%, well below the Fed's target.

     WASHINGTON (MNI) - Analysts expect September to post healthy gains in

personal income and current dollar PCE, with median forecasts for 0.4% and 0.9%

gains, respectively. However, the core PCE price index is expected to continue

its soft trend of a 0.1% gain, for the fifth month in a row. 

     Analysts expect personal income to grow 0.4%, given the 0.4% gain in

aggregate private payrolls seen in the September employment report. Expectations

for a 0.4% September gain are largely in line with Friday's advance Q3 GDP

report which implied a 0.3% gain if no revisions to July and August data, as

well as a modest bounce back in utilities output.

     If current dollar PCE realizes its 0.9% forecasted gain, this would be the

fastest pace in almost eight years. Analysts expect this strong rebound, after

August's 0.1% increase, to be largely driven by hurricane impacts of vehicle

replacement and the surge in gas prices. Capital Economics also notes that

September's retail sales report showed a healthy increase of 0.4% m/m for

control group sales - adding to the potential for current dollar PCE to jump.

     Based on September CPI and PPI, analysts such as Morgan Stanley expect core

PCE inflation to rise 0.1% for a fifth straight month. Credit Suisse notes that

this would leave the year/year pace of growth unchanged at 1.3% - well below the

Fed's 2.0% target. 

     While a soft reading is expected for the core PCE price index, the Fed's

preferred measure of inflation, the market's attention remains on the nonfarm

payroll report to be released Friday, as much of the personal income report can

already be ascertained via the advance Q3 GDP report.

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

[TOPICS: MAUPR$,M$U$$$]