KEY DATA: Spending: 0%; Income: +0.2%; Prices: +0.1%; Excluding Food and Energy: +0.2%/ Confidence: +1.4 points

IN A NUTSHELL: “With incomes still growing slowly, consumers are not overly excited about things so they are not going out and shopping ‘till they drop.”

WHAT IT MEANS: If consumers are driving the economy, they seem to be stuck in traffic. Household spending was flat in August, but that was not really a surprise. Vehicle sales were down and that led to a sharp decline in durable goods demand. But consumption of nondurables was also off, so it is clear people didn’t visit the malls a whole lot either. However, people did purchase all sorts of services, which does make up two-thirds of consumption. So that is a positive sign. When you adjust for inflation, spending actually declined and so far this quarter, consumption is growing at a disappointing 2.3% pace. I suspect that will improve as vehicle sales may have rebounded in September.

The real question is whether spending can accelerate and that depends upon income growth and consumer confidence. Household disposable income did rise a touch in August, but not greatly when you adjust for prices. Worse, wages and salary gains came to a near halt. Why that happened is anyone’s guess, but if workers don’t have more money to spend, businesses will not see spending rise sharply, especially since people are trying to save. The savings rate inched up in August, an indication that households are not totally comfortable about the state of the economy. The University of Michigan’s Consumer Sentiment Index rose in September after having dropped in July and August. The index has gone nowhere this year as it was noted that the average for the nine months was almost exactly the same as the September level.

On the inflation front, prices rose minimally, but a touch faster when food and energy were excluded. Since September 2015, overall consumer costs were up a modest 1%, but excluding food and energy, they rose 1.7%, not that much below the Fed’s 2% target. The energy restraint should be largely disappearing over the next few months, so watch for the top line inflation rate to start approaching 2% by early 2017.

MARKETS AND FED POLICY IMPLICATIONS: I am sure the Fed would like to see wages rising faster and households spending that money vigorously. They will just have to wait longer for that to happen. With concerns about Deutsche Bank overhanging the market, the soft consumer spending number cannot be helpful. Interestingly, eight years ago, the rumors would have created major fear in the markets, which doesn’t seem to be the case right now. It just may be that all the new regulations and demands for additional capital have actually limited what could have been a time of worry. But, of course, regulation is bad, at least that is all I hear from my colleagues in the financial sector. Maybe not so much. Hopefully, the issues with Deutsche Bank will be eased by December. I don’t want the Fed to have another excuse to punt.