Low Inflation, Personal Spending, Pending Home Sales
September 28, 2015
Monday – September 28
Inflation remained tame at the consumer level as evidenced by the Core Personal Consumption Expenditure (PCE). The Core PCE rose by 0.1% in August from July, due in part to falling gas prices. Meanwhile, year-over-year Core PCE grew by 1.3%, which is well below the Federal Reserve’s target level of 2%. Low inflation levels could keep the Federal Reserve from raising interest rates this year and they could hold off a hike until next year.
Americans opened their wallets in August on goods ranging from back-to-school items to new autos, signaling the U.S. economy continues to grow. The Commerce Department reported Monday that Personal Spending rose 0.4% last month, above the 0.3% expected. In addition, Personal Incomes rose 0.3%, just below the 0.4% anticipated and have been steadily rising since April. Since spending outpaced incomes, the personal savings rate ticked down to 4.6% from 4.7%.
Over in the housing markets, Pending Home Sales in August unexpectedly declined by 1.4% as rising home prices keep buyers on the fence. The National Association of REALTORS® (NAR) said that despite the weak reading, sales are still up 6.1% from a year ago. The biggest decline was seen in the Northeast falling by 5.6%, the Midwest saw a 0.4% decrease, the South saw sales fall 2.2%, while the West registered a 1.8% gain. Pending Home Sales measures housing contract activity. It is based on signed real estate contracts for existing single-family homes, condos and co-ops. A signed contract is not counted as a sale until the transaction closes.