Personal Income Picks Up, Consumption Slows

Income picked up slightly in July and consumption slowed slightly in what was another constructive month for the consumer.

Personal income rose 0.4 percent in the month with June revised 1 tenth higher to plus 0.3 percent. Income got another solid boost from wages & salaries which rose 0.5 percent for a second straight month. The consumer put some of this money into the bank with the savings rate rising 2 tenths to 5.7 percent.

Consumer spending rose 0.3 percent in the month following 0.4 percent gains in the prior two months. Spending on durables got a big boost from the month's strong auto sales while non-durables were pulled down by price effects for energy. Service spending was solid but down slightly from prior months.

Price data are not showing any pressure, unchanged in the month for the overall PCE price index and up only 0.1 percent for the core index (ex-food ex-energy). The year-on-year rate for the core PCE, which is the Fed's central price gauge, is unchanged to extend a long string, stuck at 1.6 percent.

The respectable showings for income and spending are no surprise given the strong employment report for July, strength that is the underpinning of the consumer. The outlook for August will unfold this week, with vehicle sales on Thursday and the employment report on Friday.

Recent History Of This Indicator:
Accelerating strength in consumer spending is not expected for July, which forecasters see coming in at plus 0.3 percent vs a 0.4 percent gain for June. But greater strength, at plus 0.4 percent, is expected for personal income in what would be a reversal of the undersized gains in the two prior months. Strength once again is not expected for either the PCE price index nor the core PCE price index where forecasters are calling for no change and a 0.1 percent gain.