Economic Data Ahead - What to expect

Personal Incomes and personal expenditures came in last week, and non-farm payrolls come in on Friday, here is the breakdown

Last week, the Bureau of Economic Analysis released the monthly numbers on Personal Incomes, Personal Expenditures, and the all-too-crucial PCE Price index. Mostly, the numbers fell in line with expectations. Incomes are moderating as well as expenditures. The price index fell a bit more than anticipated, but the bond market still did not like what it saw and yields spiked higher, pushing the stock market lower.

For me, personal incomes and personal expenditures are the start of analysis. The PCE Index is an effect, not the cause. Looking forward, breaking down personal incomes and personal expenditures, you can see the effects of the higher for longer interest rates are having the intended effect on both incomes and expenditures, which will eventually affect price pressures.

With personal incomes and personal expenditures maintaining a level that are below the median, price pressures will decline. This is because fewer and fewer individuals are being hired, leading to a slower pace of growth for incomes, and by extension, expenditures. This also breaks down to being a slower pace for revenue growth for companies, which would translate into a declining rate of profits. The stock market is effectively on shaky ground when you look at valuations from this angle. And, notwithstanding the AI stock frenzy, the broader breadth of stocks is likely to wobble in the coming months.

In the meantime, non-farm payrolls, due Friday of a holiday-shortened work week, will add to the data that shows a declining economic growth rate.