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First Cut: Personal income rising on gains in wages and salaries, consumption restrained by nondurables, PCE deflator ticks up at the core

Personal income was up 0.4% in August from July, a return to trend after a pause with a 0.1% increase in July. Wages and salaries once more had solid rise from the prior month at up 0.6%.

Personal consumption expenditures were overall up only 0.1% in August. However, spending on durables was up 0.7% and services were up 0.2%. The 0.2% decline in nondurable spending can be attributed to recent drops in gasoline prices that will be reversed in the September data.

The PCE deflator held at up 1.4% year-over-year in August. However, the core PCE deflator ticked up a tenth to up 1.8% and its fastest pace since up 1.8% in January. This speaks to the idiosyncratic nature of the decrease in overall price pressures that was visible in the data starting in January. Prices excluding food and energy — what Fed policymakers tend to pay more attention to — are starting to be within range of the Fed’s symmetric 2% objective. This could make the argument that with price stability nearing target and the labor market to all appearances still strong, a third rate cut may not be needed in 2019 to achieve the dual mandate.

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