Personal Income And Spending On The Rise

The consumer is strong and steady as underscored by the Federal Reserve while prices are showing a little more pressure than expected. Personal income rose 0.5 percent in May to beat expectations by 2 tenths while consumer spending rose an as-expected 0.4 percent with a 3 tenths upward revision to April, now at 0.6 percent, an unexpected plus. The core PCE price index rose 0.2 percent for a second straight month with the year-on-year rate steady at 1.6 percent, both soft but slightly better than expected. Overall prices also rose 0.2 percent on the month with this yearly rate down 1 tenth to 1.5 percent which is still 1 tenth better than Econoday's consensus.

The gain for income did not reflect, however, strength for wages & salaries which inched a subpar 2 tenths higher in the month for the weakest showing since November. Strength in income instead came from proprietors' income and gains on asset transfers. Spending data got a lift a strong lift from durable goods, which reflects auto sales, with nondurable spending down slightly and service spending up an intrend 0.4 percent.

Whether strength in spending continues will turn on June auto sales (data to be released next week) while improvement in core prices, and whether it continues, is less certain. Nevertheless, the modest but respectable showing for core prices in today's report will help turn the heat down on the Federal Reserve to cut rates at their meeting late next month.