This Morning’s Macro Recap: Income & Consumption, ECI, Chicago PMI, & Consumer Sentiment

Personal Income showed no change for September after a revised increment +0.1% in August, this was inline with the consensus forecast.  Personal Consumption Expenditures (PCE) declined -0.5% in September, versus a revised increment of +1.4% in August.  The decline in consumption is the continued aftereffects caused by the expiration of the US government’s ‘Cash for Clunkers’ program’.  The program significantly bolstered sales during the months it was active, by at least partially,  leading some consumers–who would have been purchasing over the current months–to buy earlier in order to take advantage of the discount.  Additionally, relatively benign income growth over the past several months is unlikely to help catalyze any significant jump in consumer spending.   This data is indicative that the strong bounce in 3Q09’s personal consumption component of GDP will likely not be repeated in 4Q09.  The good news is that the inflation component of the report remains at relatively subdued levels.

October’s Chicago Purchasing Managers Index rose to 54.2 from 46.1 in September easily beating expectations.  The new orders index jumped to 61.4 in October from 46.3 in September, while the production index climbed to 63.9 in from 47.2. The employment index reported a modest decline to 38.3 October from 38.8 a month prior, while the prices paid component fell to 48.6 from 51.3.  A large jump in October’s new order index should bode well for the headline number next month.

October’s final University of Michigan Consumer Sentiment Index rose to 70.6 compared to a preliminary reading in October of 69.4; September’s final reading was 73.5.  This was essentially inline with expectations, but the fact that the final release declined from last month highlights the fact that consumers remain nervous, which will likely adversely impact the holiday shopping season.

In other news, the employment cost index rose 0.4% in 3Q09, which continues to indicate that wage pressure remains relatively benign.  This will not go unnoticed by the FOMC, who will likely keep their policy stance unchanged through most of 2010.