Quotes from TD Economics:
- Today’s personal spending numbers were already baked into yesterday’s advance estimate of third quarter real GDP that showed decent-but-not-strong private consumption growth. Nonetheless, the monthly pattern points to a deceleration in spending momentum as Q3 came to a close, which, because of a weak hand-off, suggests downside risk to fourth quarter GDP.
- The fact that the savings rate has edged up suggests that a rebound in spending may be around the corner. However, the lack of any real income growth is a concern. We remain confident that a tightening labor market will eventually lead to faster income growth, but clearly this has yet to manifest itself, and may take several more months to occur.
- Inflationary pressures continue to remain particularly subdued. In its statement this week, the Fed claimed that even if inflation is held down temporarily by lower energy prices and other factors, as is currently the case, the risk that inflation run persistently below 2% had diminished relative to earlier this year.
- If oil prices remain at current levels and the dollar continues to appreciate, inflation is likely to continue to drift downward and stay below target for an extended period of time. The odds of a first rate hike in a sub-2% inflation environment are slim, which is why we expect the Federal Reserve to remain on the sidelines until at least Q3 2015.
Published: 2014-10-31 15:54:00 UTC+00
U.s. Consumers Cut Spending in September: Td Economics
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