U.S. Personal Spending and Income Post Solid Gains in August

Personal consumption expenditures rose 0.3% (5.3% y/y) in August following an upwardly revised 0.5% m/m gain in July. Personal income also rose 0.3% m/m (4.7% y/y) in August, the same monthly increase as in July. The Action Economics Forecast Survey had looked for a 0.3% m/m increase in consumption and a 0.4% m/m gain in income. In constant dollars, personal spending increased 0.2% (3.0% y/y), a slowdown from the 0.3% m/m rise posted in each of the previous four months. The 3.0% y/y rise in real PCE was the fastest since February 2016. For the first two months of the third quarter, real PCE is on track for a 3.1% q/q annual rate increase from the second quarter--a slowdown from the 3.8% q/q posted in Q2 but still a solid rise that should make a meaningful contribution to overall GDP growth. Disposable income rose 0.3% m/m (5.2% y/y) in August, the same gain as in July. After adjusting for inflation, real disposable income increased 0.2% m/m (2.9% y/y) in August. The saving rate was unchanged at 6.6% in August. Personal saving was up 2.4% from a year ago.

Looking behind the gains in total real PCE, real spending on durable goods rose 0.2% m/m (6.4% y/y) despite a 0.3% m/m decline in spending on motor vehicles and parts. Real spending on nondurable goods increased a solid 0.4% m/m (3.3% y/y). Real spending on services increased 0.2% m/m (2.5% y/y), the same monthly gain as in July. Real spending on energy fell 0.3% m/m (+1.0% y/y), its third monthly decrease in the past four months. Real spending on food services and accommodation (a good indicator of discretionary spending) slipped 0.1% m/m (+5.5% y/y) in August after having posted three consecutive monthly gains in excess of 1% m/m.

The 0.3% m/m increase in personal income was led by a 0.5% m/m rise (4.8% y/y) in wages and salaries. The August increase was the largest monthly gain since January. Proprietors' income rose 0.3% m/m (5.1% y/y). Rental income jumped 0.8% m/m (5.0% y/y), its largest monthly gain since last October. Income from assets slipped 0.1% m/m in August, its second consecutive monthly decline, but was 5.5% higher than a year earlier.

The chain type price index inched up 0.1% m/m for the third straight month. The y/y rate slipped to 2.2% from 2.3% in July. The index excluding food and energy prices (the measure on which the Fed focuses) was unchanged in August from July, as was the y/y rate at 2.0%--the Fed's target. Energy prices jumped 1.9% m/m after having declined in each of the preceding two months. Food prices were unchanged in August (+0.5% y/y).

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.