An illuminating income and spending report last week:
August Personal Income & Spending: +0.3% & +0.5%. Both gauges rise as expected, given the strong August retail sales report (8/16/14 showing a +0.6% gain). Compared to last year, income (+4.1%) is outpacing spending (+4.4%), resulting in a little savings. Consumer prices were unchanged in August, leaving a very calm (+1.5%) annual gain that gives the Fed room to keep rates low. Core consumer prices gained (+0.1%) in August but also remained at a subdued (+1.5%) rate. Expansionary monetary policies in Europe and Japan will keep interest rates low, strengthen the dollar and keep inflation at bay.