US personal consumption expenditure preview

Personal consumption, income data along with PCE price index would be released from US at 13:30 GMT.

Why it matters?

• Personal consumption and income data provide information on consumer sentiment. Consumers tend to spend more, should they perceive upcoming time to be favorable.
   
• Increase in income also improves sentiment and purchasing power of consumers.
   
• PCE price index or PCE deflator is FED's preferred measure of inflation indicator. So this gauge is of extreme importance as FED's price stability mandate makes inflation is of higher priority as of now. Jobless rate is already near FED's longer term target level.

Past trends -                      

• PCE price index, largely due to oil price started falling from 1.8% y/y in mid-2014 to as low as 0.1% y/y in June 2015. It has remained in the low area since, only in November it has shown some strength in November by ticking up 0.4%.
   
• Core PCE price index is also pointing to slowdown as lower energy prices might be feeding into prices and spending remains subdued. In November core PCE came at 1.3% y/y.
   
• Personal income growth has remained positive since 2013, however at subdued pace. Income has picked up somewhat last year as improvement in the economy might finally be adding pressure on wages. In November personal income grew 0.3%
   
• Personal spending, after growing as much as 0.9% in June, again dropped to as low as 0.1% in October. November reading was relatively better 0.3%.

Expectation today -

• Personal income is expected to grow by 0.2% and spending at 0.1%.

Market impact -

• If data sours, market might face some risk aversion selling as concern will be there that US economy might be slowing down. Dollar might also lose some of its lustre.

Dollar index is currently trading at 99.38.