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Personal Income:  Income Steady as PCE Declines Modestly

August 31, 2017
Bottom Line: While the July rebound in personal income was modestly more than expected, consumer spending was a touch slower than expected to start the 3rd Quarter, up just 1.9% annualized from its 2nd Quarter pace. This indicates that while consumption growth accelerated in late 2Q (as seen in yesterday's GDP revisions), consumers were still spending cautiously to start Q3.

Core PCE, the Fed's preferred inflation metric, grew just 0.09%, 1.2% annualized in the last 3 months and 1.4% over the last 12 months.

Personal Income ROSE by 0.4% in July, compared with market expectations for an increase of 0.3%. The prior month was revised higher from -0.02% to 0.03%. Personal Income is now 2.7% ABOVE its year ago level.

Wages and Salaries ROSE by 0.5%, Wages are now 2.5% ABOVE year ago levels. Personal Tax Payments ROSE by 1.3% and are now 2.9% ABOVE their year ago level, reflecting the year-on-year changes in employment and income.

Disposable Income ROSE by 0.3% and is now 2.7% ABOVE its year ago level.

Consumer Spending ROSE by 0.3%, compared with market expectations of an increase of 0.4% The prior month was revised higher. There were modest increases in durable goods, modest increases in nondurable goods spending and small increases in services spending. Spending is now 4.2% ABOVE its year ago level.

The Saving Rate FELL by 0.10 points to 3.5%.

The PCE Price Index ROSE by 0.1% and is now 1.4% ABOVE its year ago level. Meanwhile, the Core PCE Index ROSE by 0.1% and is now 1.4% ABOVE its year ago level.

Real Consumer Spending ROSE by 0.2% and is now 2.7% ABOVE its year ago level. The July level is 1.9% annualized above its Q2 level.