U.S. Commerce Department Reports Big Jump in Consumer Spending

The government said on Monday that U.S. consumer spending recorded its biggest increase in more than eight years in September. The catalyst behind the increase was a jump in spending from households in Texas and Florida that were forced to replace flood-damaged motor vehicles caused by Hurricanes Harvey and Irma.

According to the U.S. Commerce Department, consumer spending rose 1.0 percent last month, the largest single-month gain since August 2009. The increase also included a boost from higher household spending on utilities. Analysts were looking for a 0.8% gain. Consumer spending in August also increased by an unrevised 0.1 percent.

The Federal Reserve’s preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, edged up 0.1 percent in September. This was the fifth straight month of 0.1 percent increases.

Personal income rose 0.4 percent last month after increasing 0.2 percent in August. Wages advanced 0.4 percent.

U.S. Equity Markets

The major U.S. stock markets were under pressure on Monday as investors pared positions in response to a report that said the House is considering a plan that would gradually lower the U.S. corporate tax rate. Bloomberg reported the plan being discussed by the House would leave the corporate rate at 20 percent by 2022. The gradual plan “has been considered” but is not final, according to the report.

Forex

The U.S. Dollar weakened against a basket of currencies on Monday, pressured by end-of-the-month position-squaring and profit-taking after last week’s steep run-up. Investors were also heading to the sidelines ahead of several key central bank announcements this week.

Gold

Gold prices finished higher on Monday in reaction to the weaker dollar. Safe haven buying ahead of a series of central bank meetings and U.S. President Trump’s expected announcement of the next Fed Chair also contributed to the gains. The market also remained underpinned by the ongoing unrest in Spain’s Catalonia region. The federal indictment of former Trump campaign manager Paul Manafort also helped support prices.

Crude Oil

Crude oil continued to receive support from speculation that the OPEC-led production cut due to expire next March would be extended, although rising exports from Iraq kept a lid on prices.

Traders are saying that they expect to see the production cuts extended when OPEC officially meets at its headquarters in Vienna, Austria, on November 30.

In other news, traders said that a 900,000 barrel per day export capacity increase from Iraq’s southern ports to 4.6 million bpd, reported on Sunday, had prevented Brent from rising further.