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Personal Income: Core PCE Edges Lower, Spending Accelerates

July 31, 2018
Bottom Line: Personal income rose while disposable income rose modestly in June.The Q2 spending average was 4.0% annualized above its Q1 level, mostly in-line with previous reports. Core PCE, the Fed's preferred inflation metric, grew 0.11%, 1.8% annualized in the last 3 months and 1.9% over the last 12 months. On a trend basis Core PCE is lost some of its upward momentum as it hit the critical 2% level. Spending, however, continued to accelerate higher but is still not at cycle highs in terms of year-on-year growth. Year-on-year income gains also remain well below cycle highs.

Personal Income ROSE by 0.4% in June, compared with market expectations for an increase of 0.4%. The prior month was revised higher from 0.35% to 0.38%. Personal Income is now 4.9% ABOVE its year ago level.

Wages and Salaries ROSE by 0.4%, Wages are now 4.8% ABOVE year ago levels. Personal Tax Payments ROSE by 0.3% and are now 1.5% ABOVE their year ago level, reflecting the year-on-year changes in employment and income.
Disposable Income ROSE by 0.4% and is now 5.4% ABOVE its year ago level.

Consumer Spending ROSE by 0.4%, compared with market expectations of an increase of 0.4% The prior month was revised higher. There were no changes in durable goods, a small decline in nondurable goods spending and a modest increases in services spending. Spending is now 5.1% ABOVE its year ago level.
The Saving Rate was UNCHANGED at 6.8%.

The PCE Price Index ROSE by 0.1% and is now 2.2% ABOVE its year ago level. Meanwhile, the Core PCE Index ROSE by 0.1% and is now 1.9% ABOVE its year ago level.

Real Consumer Spending ROSE by 0.31% and is now 2.8% ABOVE its year ago level. The Q2 spending average was 4.0% annualized above its Q1 level.