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In July, the U.S. personal income had risen sharply by 0.4 percent, owing mainly to a huge increase in average hourly earnings and solid job gains. However, that pace is expected to have moderated in August. According to a Societe Generale research report, the pace is likely to have eased to 0.2 percent rise as private payrolls rose just 0.1 percent, whereas earnings rose by a similar magnitude.

Still, salaries and private wages gained 4.3 percent in July, a strong rate that might continue to support consumer spending in the future. However, nominal spending in August might have increased at a more subdued pace of 0.2 percent. Retail sales were subdued in August as the headline figure dropped 0.3 percent and the control group recorded a disappointing 0.1 percent decline.

“Given that we look for the headline PCE deflator to have increased by 0.2 percent in the month, real expenditures in August could have been little changed”, added Societe Generale.

In the meantime, the inflation figures are expected to have been more constructive in August. Given the PPI and the CPI data, the headline PCE deflator is anticipated to have risen by 0.2 percent in August. This might result in the year-over-year rate rising up from 0.8 percent to 0.9 percent. The core PCE deflator might have risen by 0.175 percent. This is expected to maintain the year-on-year inflation rate stable at 1.6 percent.

“But we would note that our un-rounded forecast is 1.647 percent, so clearly the risk is that a slightly firmer monthly reading could lead to the annual rate rounding up to 1.7 percent, which would mark the fastest advance since February”, stated Societe Generale.