US income and spending report concludes exciting week

The euphoria following late Wednesday’s plan for the Eurozone is slowing fizzling out as more details appear with US equity futures currently firmly in the red. Among the sceptics is the rather new Bundesbank president and European Central Bank member Jens Weidmann
who pointed out the flawed solution of using leverage to solve debt and even likened it to the cause of the 2008 financial implosion.

US Personal Spending and Income set for gains: The monthly income and spending report from the US concludes a busy week were we saw numbers on Durable Goods Orders, home prices, New Home Sales, GDP from the US and PMIs from the Eurozone, though they have understandably been overshadowed by the Eurozone developments.
Consensus expects today’s income and spending report to show of 0.3 and 0.6 percent, respectively, in September following a rather poor August. With 3Q GDP already released analysts should have a good gauge of the September numbers, and we want to focus on savings instead. We suggested as far back as our Yearly Outlook that a decline in the savings rate would support domestic consumption (as seen in yesterday’s GDP report where PCE grew 2.4 percent annualised), the concern is now that unless the US is headed back down to credit-binge levels of savings then this method of boosting consumer spending will soon be more or less depleted and consumers in the US will have to find more sustainable ways to support consumption. Having seen an average of 5.3 percent in 2010 the average for the first eight months of 2011 is 4.9 percent and bound to head lower. As long as employment and wages do not improve faster than is currently the case, consumption may be weaker in the fourth quarter or 2012 – depending on whether American households can draw down savings further amid pressures to deleverage.

Update:
SW Consumer Confidence out at -7.5
SW Manufacturing Confidence out at -7 (Sep revised to -4)
SW Economic Tendency Survey out at 94.3 (Sep revised to 96.6)
SW Retail Sales MoM out at -0.2%

source from: tradingfloor