U.S. Personal Spending Growth Accelerates, but Income Gain Remains Weak; Inflation Steadies

Personal consumption expenditures (PCE) increased 0.8% during July (6.4% y/y) following a 0.6 June rise, revised from 0.5%. A 0.7% gain had been expected in the Action Economics Forecast Survey. Adjusted for price increases, PCE rose 0.6% after gaining 0.4% in June. The y/y rise of 3.0% in real PCE was the strongest since February of 2022.

Real spending on durable goods jumped 1.4% (5.4% y/y) in July after a 1.1% June gain. Spending on motor vehicle & parts rose 0.6% (8.4% y/y) after rising 0.9% in June. Real spending on furniture & appliances rose 1.1% (2.9% y/y) after strong gains in both of the prior two months. Real spending on recreational goods & vehicles surged 2.5% (7.0% y/y) after strong increases in each of the prior three months.

Real spending on nondurable goods rose 0.7% last month (2.1% y/y) after gaining 0.5% in June. Real apparel spending surged 1.5% (0.7% y/y) after negligible gains in each of the prior three months. Real food & beverage outlays rose 0.5% (0.4% y/y) following a 0.2% gain. Real outlays on gasoline & other energy products declined 1.6% (+5.8% y/y) after increasing 2.0% in June.

Real spending on consumer services rose 0.4% (2.9% y/y) in July after a 0.3% June rise. Financial services & insurance expenditures surged 1.1% (3.0% y/y) after strengthening 1.3% in June. Real hotel & restaurant spending strengthened 1.1% (4.3% y/y) following a 0.6% improvement. Real transportation services outlays rose 0.4% (4.2% y/y) following a 0.5% decline while real housing & utilities expenditures also rose 0.4% (1.5% y/y) after a 0.3% June improvement. Real healthcare spending gained 0.2% (5.5% y/y) in July after two months of 0.1% rise but recreation services outlays fell 0.5% (+4.3% y/y) after surging 1.5% in June.

Personal income rose 0.2% in July (4.6% y/y) after increasing an unrevised 0.3% in June. A 0.3% rise had been expected. It was the weakest increase since December of last year. The gain reflected a 0.4% increase (4.8% y/y) in wages & salaries which followed a 0.6% June rise. Proprietors' income rose 0.5% (4.2% y/y) last month after a June rise of 0.4%. Rental income surged 1.1% (10.5% y/y) after a 0.4% rise. Receipts on assets held steady (+4.0% y/y) following a 0.3% June decline. Interest income rose 0.3% (6.4% y/y) after two consecutive 0.6% increases but dividend income declined 0.2% (+1.5% y/y) following a 1.2% drop. Personal transfer receipts weakened 0.6% (+4.1% y/y) in July after falling 0.3% in June.

Disposable personal income held steady (+7.2% y/y) in July following a 0.2% rise in June. Taxes strengthened 1.3% (-10.1% y/y) after rising 0.6% in June. Real disposable income fell 0.2% (+3.8% y/y) last month after holding steady in June.

The personal savings rate fell to 3.5% in July from 4.3% in June. It was the lowest savings rate since November of last year and below the May high of 4.7%. The level of personal savings fell 17.2% (+9.4% y/y) last month following a 9.3% June decline.

The PCE chain price index rose 0.2% (3.3% y/y) last month, the same as in June. The index excluding food & energy rose 0.2% (4.2% y/y), also the same as in June. These increases remain down from the 0.6% August 2022 high. Goods prices fell 0.3% (-0.5% y/y) following two straight 0.1% declines. Durable goods prices were off 0.7% (-0.8% y/y) after falling 0.3% in June. Nondurables prices were little changed (-0.2% y/y) after edging 0.1% higher in June. Services prices gained 0.4% (5.2% y/y) following a 0.3% rise. The services price index excluding energy & health care increased 0.5% (6.4% y/y), down from a high of 0.7% in January. Energy prices edged 0.1% higher (-14.6% y/y) in July following a 0.6% rise while food prices rose 0.2% last month (3.5% y/y) after easing 0.1% in June.

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