Inflation stats in line/the US savings rate is down to just 3.5%/DG the retail disaster du jour/Labor market

The PCE inflation data for August was as expected and because it comes weeks after CPI and PPI, usually doesn't deviate much from forecasts. Both headline and core were up .2% m/o/m and the headline y/o/y increase was 3.3% vs 3% in July and the core rate was up by 4.2% vs 4.1% in July. Again, the PCE overweights healthcare relative to CPI while underweighting housing. No change today in the 5 yr inflation breakeven with the data in line with what was forecasted. 

Goods prices fell .5% y/o/y but completely offset and then some by a 5.2% rise in services. Food prices were up by 3.5% y/o/y while energy prices dropped by almost 15% y/o/y. Once we recycle the energy price declines, the recent rise will see an upward inflection. The rent slowdown will eventually show up but within CPI, health insurance prices are about to shift higher again. PCE relies almost solely on medicare and medicaid reimbursement rates and thus is price fixed at low levels 

The August income and spending numbers were a touch better than expected but with the latter rising more than the former, the savings rate plunged to just 3.5% from 4.3% in June and 4.7% in May. That's the lowest since last October and for perspective, the savings rate for the 20 yrs leading into Covid was 6%. 

Bottom line on the US consumer, if read/heard like me the earnings calls over the past few weeks and we now have a savings rate that is down to just 3.5%, we must be concerned with the state of US consumer spending and behavior.