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 deflator had been gaining last year, however started going down in latter half of the year as oil price fell close to 50%. In September PCE price index grew just 0.2% YoY but core PCE deflator remained at 1.3% YoY.
   
• Core PCE price index is also pointing to slowdown as lower energy prices might be feeding into prices and spending remains subdued.
   
• Personal income growth has remained positive since 2013, however at subdued pace. Income has picked up somewhat this year as improvement in the economy might finally be adding pressure on wages. In September however, personal income grew by 0.1%, after 0.3% rise in August.
   
• Personal Spending grew 0.1% in September compared to0.4% in August, and at 0.9% in June.

Expectation today 

• Personal income is expected to grow by 0.4% and spending at 0.3%.
• PCE is expected to grow at 0.2% y/y for headline and 1.3% for core.

Market impact -

• Dollar regained some of its lost charm today, however any weakness in the data might spoil the mood.
   
• Any large selloffs in dollar is not expected. Short term treasury yield gains might be large over higher core PCE price increase.

FXCM US Dollar index is currently trading at 12180.