U.S. Personal Spending Moderates & Income Improves; Inflation Accelerates in August

Personal consumption expenditures (PCE) increased 0.4% during August (5.8% y/y) after rising 0.9% in July, revised from 0.8%, following a 0.4% June gain, revised from 0.6%. A 0.5% rise had been expected in the Action Economics Forecast Survey. Adjusted for price increases, PCE edged 0.1% higher following an unrevised 0.6% July gain. The 2.3% y/y rise in real PCE remained improved from 0.9% y/y in November of last year. These figures reflect benchmark revisions.

Real spending on durable goods fell 0.3% (+4.0% y/y) in August after rising 1.2% in July. Spending on motor vehicle & parts declined 0.9% (+4.4% y/y) after rising 1.3% in July. Real spending on furniture & appliances declined 0.5% (+1.0% y/y) after a 0.3% rise. Real spending on recreational goods & vehicles improved 0.3% (8.3% y/y) after rising 2.1% in July.

Real spending on nondurable goods eased 0.1% last month (+1.1% y/y) after gaining 0.5% in July. Real apparel spending held steady both m/m and y/y after strengthening 1.4% in July. Real food & beverage outlays eased 0.1% (-0.4% y/y) following a 0.4% gain. Real outlays on gasoline & other energy products declined 0.4% (+1.2% y/y) after falling 1.8% in July.

Real spending on consumer services rose 0.2% (2.4% y/y) in August after a 0.6% July rise. Real transportation services outlays jumped 1.1% (0.5% y/y) following a 0.5% gain while real housing & utilities expenditures eased 0.1% (+1.0% y/y) after a 0.9% July rise. Real hotel & restaurant spending improved 0.2% (2.1% y/y) following a 0.6% increase. Real healthcare spending gained 0.2% (5.1% y/y) in August as it did in July and recreation services outlays rose 0.5% (4.6% y/y) after rising 0.2%. Financial services & insurance expenditures rose 0.1% (3.4% y/y) after strengthening 1.2% in July.

Personal income rose 0.4% in August (4.8% y/y) after increasing an unrevised 0.2% in July. A 0.5% rise had been expected. The gain reflected a 0.5% increase (5.7% y/y) in wages & salaries which followed a 0.4% July rise. Proprietors' income rose 0.4% (1.6% y/y) last month after a July rise of 0.3%. Rental income surged 1.0% (9.8% y/y), about as it did in July. Receipts on assets improved 0.5% (4.9% y/y) following a 0.3% July rise. Interest income surged 0.9% (8.5% y/y), the same as in July, but dividend income improved just 0.1% (1.5% y/y) following two straight months of decline. Personal transfer receipts weakened 0.2% (+2.7% y/y) in August, off for the third consecutive month.

Disposable personal income rose 0.2% (7.3% y/y) in August after little change over the prior two months. Taxes strengthened 1.5% (-10.2% y/y) after rising 2.1% in July. Real disposable income fell 0.2% (+3.7% y/y) last month, the same as it did in July.

The personal savings rate fell to 3.9% in August from 4.1% in July. It was the lowest savings rate since December of last year and below the May high of 5.3%. The level of personal savings fell 4.7% (+29.5% y/y) last month, the third straight month of decline.

The PCE chain price index rose 0.4% (3.5% y/y) last month, the strongest increase since January. The index excluding food & energy edged 0.1% higher (3.9% y/y) following two straight months of 0.2% increase. These increases remain down from the 0.5% high this past January. Goods prices rose 0.8% (0.7% y/y) following three straight months of declines. Durable goods prices were off 0.3% (-1.9% y/y) after two months of decline. Services prices gained 0.2% (4.9% y/y) following a 0.5% rise. The services price index excluding energy & health care increased 0.2%, down from a high of 0.7% in January. The 6.1% y/y rise is below the February high of 7.1%. Nondurables prices rose 1.4% (2.1% y/y) after holding roughly steady in July. Energy prices rose 6.1% (-3.6% y/y) in August following a 0.1% uptick while food prices rose 0.2% last month (3.1% y/y) for the second straight month.

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.