Personal Income: Steady Gains Continued As Spending Approaches Cycle Highs

Bottom Line: Personal income rose less than expected while disposable income rose modestly, in-line with expectations, in July. Real consumer spending rose slightly in July and increased by 2.1% annualized, but grew at a lower rate than it did the previous quarter. Core PCE, the Fed's preferred inflation metric, grew 0.16%, 1.9% annualized in the last 3 months and 2.0% over the last 12 months. Overall on a trend basis, income gains and personal spending are accelerating moderately with spending approaching but still not eclipsing its fastest pace of this economic cycle. Personal Income ROSE by 0.3% in July, compared with market expectations for an increase of 0.4%. The prior month was revised lower from 0.41% to 0.38%. Personal Income is now 4.7% ABOVE its year ago level. Wages and Salaries ROSE by 0.4%, Wages are now 4.7% ABOVE year ago levels. Personal Tax Payments ROSE by 0.1% and are now 0.6% ABOVE their year ago level, reflecting the year-on-year changes in employment and income. Disposable Income ROSE by 0.3% and is now 5.3% ABOVE its year ago level. Consumer Spending ROSE by 0.4%, compared with market expectations of an increase of 0.4%. There were small decline in durable goods, small increases in nondurable goods spending and small increases in services spending. Spending is now 5.2% ABOVE its year ago level. The Saving Rate FELL by 0.10 points to 6.7%. The PCE Price Index ROSE by 0.1% and is now 2.3% ABOVE its year ago level. Meanwhile, the Core PCE Index ROSE by 0.2% and is now 2.0% ABOVE its year ago level. Real Consumer Spending ROSE by 0.23% and is now 2.8% ABOVE its year ago level. The July level is 2.1% annualized above its Q2 level.