US Personal Income Jun: 0.1% (est -0.3%; prevR -2.2%; prev -2.0%); US Personal Spending Jun: 1.0% (est 0.7%; prevR -0.1%; prev 0.0%); US PCE Deflator (M/M) Jun: 0.5% (est 0.6%; prevR 0.5%; prev 0.4%) - Income and spending beat, PCE comes in a touch below expectations

 

  • US Personal Income Jun: 0.1% (est -0.3%; prevR -2.2%; prev -2.0%)
  • US Personal Spending Jun: 1.0% (est 0.7%; prevR -0.1%; prev 0.0%)
  • US Real Personal Spending Jun: 0.5% (est 0.3%; prevR -0.6%; prev -0.4%)
  • US PCE Deflator (M/M) Jun: 0.5% (est 0.6%; prevR 0.5%; prev 0.4%)
  • US PCE Deflator (Y/Y) Jun: 4.0% (est 4.0%; prevR 4.0%; prev 3.9%)
  • US PCE Core Deflator (M/M) Jun: 0.4% (est 0.6%; prev 0.5%)
  • US PCE Core Deflator (Y/Y) Jun: 3.5% (est 3.7%; prev 3.4%)



June personal income bounced back after declines in April and May, edging just into positive territory at 0.1%, as private compensation filled the void left by decreasing government payments. I'll go through specifics below. That said, with inflation (PCE prices, the Fed's preferred inflation metric) up a half percent (same as May), it means that real personal income (inflation adjusted) did fall by -0.4%. Spending also beat estimates with a 1% nominal gain (0.5% real) following May's -0.1%/-0.6% decline).

I'll go through each piece independently. Overall, I think it's another good report with private sector continuing to push ahead with wage and income gains excluding transfer payments and spending remaining solid, and price pressures showing some evidence of peaking although remaining very hot for now. Selected tables at the end.

Personal Income




Headline income up slightly as the 2% reduction in government transfer payments (as stimulus payments/pandemic unemployment benefits run out) was slightly more than offset by 0.7% rise in employee compensation, 1.1% gain in proprietor's income, and 0.5% gain in dividends and interest.  This is the fourth straight month of gains for all of those components.  So the underlying economy continues to perform well.  Ex-transfer payments income is inching closer to pre-pandemic levels.


 


Consumer Spending




On a nominal basis spending up 1% after a -0.1% May (revised down from flat) but increases in April and March.  In real (inflation adjusted) terms, headline spending was up five tenths after falling six tenths in May.  Breaking it down, spending on goods increased 0.5% (was down 2.1% in May) but durable spending was down down -1.5% after falling -4.2% in May (which was revised down from -2.8%).  Non-durables were up 1.8% after falling -0.8% in May (revised down from -0.4%).  Services purchases were up 1.2% after increasing 1.0% in May, 1.5% in April and 2.3% in March (all of those prior months were revised up to those levels).  It appears motor vehicle supply issues dinged the durable goods number in May again this month.  Drugs boosted non-durables.

From the report:
The $155.4 billion increase in current dollar PCE in June reflected an increase of $29.3 billion in spending for goods and a $126.1 billion increase in spending for services. Within goods, an increase in nondurable goods was partly offset by a decrease in durable goods. Within nondurable goods, the increase was primarily accounted for by increases in “other” nondurable goods (mainly pharmaceuticals) as well as gasoline and other energy goods. Within durable goods, the decrease was primarily in motor vehicles and parts. Within services, increases were widespread across all spending categories, led by food services and accommodations.
Personal Savings

Savings rate continued to pull back but remained at historically high levels at 9.4%.  This was 27.6% in March, 14.9% in April, and 12.4% in May.



It remains near the highest of any previous reading pre-pandemic going back to 1960.




Prices

On prices, as noted headline was up 0.5% m/m after 0.5% in May (revised up from 0.4%) and 0.6% in April.  It's up 4.0% y/y.  Core (excluding food and energy, the Fed's preferred method for measuring inflation) was up 0.4% m/m and 3.5% y/y.  Goods prices were up 0.7% (slightly down from upwardly revised 0.8% in May) with durables up 1.0% (was +1.8% in May) and non-durables up 0.6% (was +0.1%) m/m. Services were up four tenths tenths, the same as the prior two months (as revised).  Food was up eight tenths (May was up three tenths) and energy was up 1.5% after a flat May. 




Here's a longer term chart.



Table of m/m income and spending:



Prices










To see more content, including my morning and evening summaries and summaries of major economic reports go to https://sethiassociates.blogspot.com



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