Keep an eye on consumer spending in the PCE report

Optimism about the US consumer is low but it’s still there. And the old rule is that you never underestimate the spending power of the US consumer.

On Wednesday, leaked Wal-Mart emails talked about reducing US inventories because of soft demand. Company officials denied it but the report will be in the back of traders’ minds when PCE data is released at the bottom of the hour.

Spending is expected to rise 0.3% m/m in August along with a 0.4% rise in income. Inflation measures will also be closely watched with an influential part of the Fed worried about sagging prices. The PCE deflator is expected up 1.2% y/y and 1.3% y/y on core items.