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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$$$]

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