Treasuries were little changed in a fairly quiet overnight session, but prices are beginning to drift higher this morning following the release of the August PCE inflation report. As expected, the GOP’s initial tax plan is coming under intense scrutiny, particularly the proposed elimination of the state and local tax deduction, but as many observers understand, this will be a drawn out and tedious battle over the next several months. As Senator Bob Corker (R-TN) said yesterday, “tax reform is going to make health care look like a piece of cake, if we do it the right way.” Some analysts suggested tax reform might be less controversial than healthcare (and easier to navigate), but nothing is easy in Congress these days. Corker’s condition at the end of the statement is important as well. A comprehensive tax reform package would be the first such effort since the mid-1980’s, and it would undoubtedly take a long time to negotiate (more than 6 months). However, there is a good chance that we see either a very watered-down version or no deal at all.
August personal income and spending growth was right in line with expectations, rising 0.2% and 0.1%, respectively. However, both headline and core PCE came in below expectations. The PCE deflator (headline measure) rose 0.2% (0.3% expected) in August from the prior month, and the deflator was unchanged on a year-over-year basis at 1.4% (1.5% expected). More importantly, core PCE rose just 0.1% m/m and 1.3% y/y. Core CPI surprised to the upside in August for the first time in six months, and it was largely attributable to firming in shelter costs. Core PCE has a much smaller weighting for shelter in its calculation, which might explain the weaker August print. The Fed appears motivated to move forward with a December rate hike, but if core inflation measures persist lower in the next few months, it may make it a much tougher sale for the doves of the FOMC.
Jason Haley
Managing Director, Investment Management Group
| Date Time | Event | Survey | Actual | Prior | Revised | |
| 09/29/2017 08:30 | Personal Income | Aug | 0.20% | 0.20% | 0.40% | 0.30% |
| 09/29/2017 08:30 | Personal Spending | Aug | 0.10% | 0.10% | 0.30% | — |
| 09/29/2017 08:30 | Real Personal Spending | Aug | -0.10% | -0.10% | 0.20% | — |
| 09/29/2017 08:30 | PCE Deflator MoM | Aug | 0.30% | 0.20% | 0.10% | — |
| 09/29/2017 08:30 | PCE Deflator YoY | Aug | 1.50% | 1.40% | 1.40% | — |
| 09/29/2017 08:30 | PCE Core MoM | Aug | 0.20% | 0.10% | 0.10% | — |
| 09/29/2017 08:30 | PCE Core YoY | Aug | 1.40% | 1.30% | 1.40% | — |
| 09/29/2017 09:45 | Chicago Purchasing Manager | Sep | 58.7 | — | 58.9 | — |
| 09/29/2017 10:00 | U. of Mich. Sentiment | Sep F | 95.3 | — | 95.3 | — |
| 09/29/2017 10:00 | U. of Mich. Current Conditions | Sep F | — | — | 113.9 | — |
| 09/29/2017 10:00 | U. of Mich. Expectations | Sep F | — | — | 83.4 | — |
| 09/29/2017 10:00 | U. of Mich. 1 Yr Inflation | Sep F | — | — | 2.70% | — |
| 09/29/2017 10:00 | U. of Mich. 5-10 Yr Inflation | Sep F | — | — | 2.60% | — |
| 10/02/2017 09:45 | Markit US Manufacturing PMI | Sep F | 53 | — | 53 | — |
| 10/02/2017 10:00 | ISM Manufacturing | Sep | 57.9 | — | 58.8 | — |
| 10/02/2017 10:00 | ISM Prices Paid | Sep | 64 | — | 62 | — |
| 10/02/2017 10:00 | ISM New Orders | Sep | — | — | 60.3 | — |
| 10/02/2017 10:00 | ISM Employment | Sep | — | — | 59.9 | — |
| 10/02/2017 10:00 | Construction Spending MoM | Aug | 0.40% | — | -0.60% | — |
| 10/03/2017 | Wards Total Vehicle Sales | Sep | 16.55m | — | 16.03m | — |
| 10/03/2017 | Wards Domestic Vehicle Sales | Sep | 12.58m | — | 12.48m | — |
| 10/04/2017 07:00 | MBA Mortgage Applications | 29-Sep | — | — | -0.50% | — |
| 10/04/2017 08:15 | ADP Employment Change | Sep | 150k | — | 237k | — |
| 10/04/2017 09:45 | Markit US Services PMI | Sep F | 55.1 | — | 55.1 | — |
| 10/04/2017 09:45 | Markit US Composite PMI | Sep F | — | — | 54.6 | — |
| 10/04/2017 10:00 | ISM Non-Manf. Composite | Sep | 55.5 | — | 55.3 | — |
| 10/05/2017 07:30 | Challenger Job Cuts YoY | Sep | — | — | 5.10% | — |
| 10/05/2017 08:30 | Initial Jobless Claims | 30-Sep | 270k | — | 272k | — |
| 10/05/2017 08:30 | Continuing Claims | 23-Sep | — | — | 1934k | — |
| 10/05/2017 08:30 | Trade Balance | Aug | -$43.0b | — | -$43.7b | — |
| 10/05/2017 09:45 | Bloomberg Consumer Comfort | 1-Oct | — | — | 51.6 | — |
| 10/05/2017 10:00 | Factory Orders | Aug | 0.90% | — | -3.30% | — |
| 10/05/2017 10:00 | Factory Orders Ex Trans | Aug | — | — | 0.50% | — |
| 10/05/2017 10:00 | Durable Goods Orders | Aug F | — | — | 1.70% | — |
| 10/05/2017 10:00 | Durables Ex Transportation | Aug F | — | — | 0.20% | — |
| 10/05/2017 10:00 | Cap Goods Orders Nondef Ex Air | Aug F | — | — | 0.90% | — |
| 10/05/2017 10:00 | Cap Goods Ship Nondef Ex Air | Aug F | — | — | 0.70% | — |
| 10/06/2017 08:30 | Change in Nonfarm Payrolls | Sep | 88k | — | 156k | — |
| 10/06/2017 08:30 | Two-Month Payroll Net Revision | Sep | — | — | — | — |
| 10/06/2017 08:30 | Change in Private Payrolls | Sep | 53k | — | 165k | — |
| 10/06/2017 08:30 | Change in Manufact. Payrolls | Sep | 5k | — | 36k | — |
| 10/06/2017 08:30 | Unemployment Rate | Sep | 4.40% | — | 4.40% | — |
| 10/06/2017 08:30 | Average Hourly Earnings MoM | Sep | 0.30% | — | 0.10% | — |
| 10/06/2017 08:30 | Average Hourly Earnings YoY | Sep | 2.60% | — | 2.50% | — |
| 10/06/2017 08:30 | Average Weekly Hours All Employees | Sep | 34.4 | — | 34.4 | — |
| 10/06/2017 08:30 | Labor Force Participation Rate | Sep | — | — | 62.90% | — |
| 10/06/2017 08:30 | Underemployment Rate | Sep | — | — | 8.60% | — |
| 10/06/2017 10:00 | Wholesale Trade Sales MoM | Aug | — | — | -0.10% | — |
| 10/06/2017 10:00 | Wholesale Inventories MoM | Aug F | 1.00% | — | 1.00% | — |
| 10/06/2017 15:00 | Consumer Credit | Aug | $15.500b | — | $18.499b | — |