The U.S. income report
The U.S. income report revealed a flat November income figure that undershot assumptions, but with a 0.2% consumption increase that left a stronger than expected 0.1% "real" rise. Analysts saw small downward income but upward consumption revisions in both Q3 and October, as also evident in today's GDP report. Analysts saw weak chain price data, with a flat headline November figure, that accounted for the upside "real" consumption surprise despite the weak income path, while the savings rate fell by more than expected to 5.5% from a downwardly-revised 5.7% (was 6.0%) rate. Despite the November drop, the savings rate has considerable room to fall as analysts continue to unwind the lofty 6.1% Q1 average. The rate could fall back to the 4.6% cycle-low from November of 2013. Analysts raised our Q4 GDP growth estimate to 1.5% from 1.3% after today's reported Q3 pace of 3.5%, and analysts raised our real Q4 consumption growth forecast to 2.3% from 1.8%, after a 3.0% Q3 clip.