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Economy in Brief

U.S. Personal Spending & Income Are Stronger than Expected in June
by Tom Moeller  July 30, 2021

• Nondurables & services outlays strengthen.

• Increase in core prices eases.

• Take-home earnings are little changed.

Personal consumption expenditures surged 1.0% (13.6% y/y) during June after easing 0.1% in May, revised from no change. Earlier figures were slightly revised. A 0.7% rise had been expected in the Action Economics Forecast Survey. Adjusted for price inflation, spending rose 0.5% (9.2% y/y) after falling 0.6% in May, revised from -0.4%. The increase in real outlays reflected a 1.2% surge (8.9% y/y) in real nondurable goods spending, after declining for two months. Real clothing surged 1.8% (20.7% y/y) after two months of over 1.0% decline. Food & beverage sales held steady (+4.4% y/y) after two months of roughly 1.0% weakening while spending on gasoline rose 2.4% (13.2% y/y) as motorists returned to the road. Real outlays on gasoline fell 12.2% from December-to-December of last year. A 2.5% falloff (+13.0% y/y) in spending on durable goods followed a 5.9% May decline. The decline was paced by a real 7.7% weakening (+10.2% y/y) in spending on motor vehicles & parts after a 10.3% May decline. Real home furniture & appliances purchases weakened 1.0% (+7.7% y/y), the third straight month of decline. Spending on recreational goods & vehicles improved 0.9% in real terms (11.5% y/y) after falling for two months. Services outlays rose 0.8% in real terms (8.6% y/y) after a 0.7% May rise. Transportation service outlays surged 2.6%, up roughly one-quarter y/y, the same as in May. Recreation services outlays in constant dollars surged 1.6% (23.6% y/y), the fifth month of strength this year. Restaurant & hotel spending strengthened 1.7% (34.1% y/y) in real terms, also the fifth month of strong increase in the last six months. Real health care outlays improved 0.3% (6.4% y/y) last month after a 0.2% rise while housing & utilities spending improved 0.3% (1.1% y/y) as they did in May.

The PCE chain price index increased 0.5% (4.0% y/y) last month, the same as in May. The price index excluding food and energy rose 0.4% (3.5% y/y), after rising 0.5% in May. Durable goods prices rose 1.0% (7.2% y/y) while nondurable costs increased 0.6% (4.1% y/y). The services price index rose 0.4% (3.3% y/y) for the third straight month. Energy prices strengthened 1.5% (24.2% y/y). Food & beverage prices rose 0.8% (0.9% y/y) after a 0.3% gain.

Personal income edged 0.1% higher in June (2.3% y/y) following a 2.2% May decline, revised from -2.0%. A 0.5% decline had been expected. Transfer payments fell 2.0% (-17.5% y/y) after an 11.9% drop. Wages & salaries strengthened 0.8% (10.1% y/y) after a 0.6% gain. Along with payroll employment it was the fourth straight month of strong growth. Proprietors' income increased 1.1% (19.9% y/y), the sixth straight month of strong gain. Rental income eased 0.3% (+1.9% y/y), off for the third straight month. Earnings on assets rose 0.5% (2.3% y/y) as dividend income rose 0.9% (1.6% y/y) and interest income improved 0.2% (2.9% y/y). Disposable personal income eased slightly (+0.8% y/y) last month after falling sharply for two straight months. Adjusted for price inflation, disposable income fell 0.5% (-3.0% y/y) after falling 3.2% in May.

The personal savings rate declined to 9.4% in June from 10.3% in May. The rate reached a record high 33.8% in April of last year. The level of personal saving has fallen by roughly one-half since last June.

The personal income and consumption figures are available in Haver's USECON database with detail in the USNA database. The Action Economics figures are in the AS1REPNA database.

Personal Income & Outlays (%) Jun May Apr Jun Y/Y 2020 2019 2018
Personal Income 0.1 -2.2 -13.6 2.3 6.5 4.1 5.1
  Wages & Salaries 0.8 0.6 0.9 10.1 1.3 4.8 5.0
Disposable Personal Income -0.0 -2.7 -15.3 0.8 7.5 3.8 5.6
Personal Consumption Expenditures 1.0 -0.1 1.1 13.6 -2.6 3.7 5.1
Personal Saving Rate 9.4 10.3 12.7 19.3 (Jun '20) 16.6 7.6 7.6
PCE Chain Price Index 0.5 0.5 0.6 4.0 1.2 1.5 2.1
  Less Food & Energy 0.4 0.5 0.6 3.5 1.4 1.7 2.0
Real Disposable Income -0.5 -3.2 -15.8 -3.0 6.2 2.3 3.4
Real Personal Consumption Expenditures 0.5 -0.6 0.5 9.2 -3.8 2.2 2.9
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