US: Personal Spending Growth Rises for the Fourth Consecutive Months in June

Jul 30 19, 13:40 GMT

Personal income rose 0.4% in June, in line with the median survey estimate. Nominal personal spending rose 0.3%, also in line with expectations. May’s spending was revised up to 0.5% (from 0.4%).
Adjusting for price effects, real spending rose 0.2%, also in line with expectations. Goods spending was up 0.4% due to a strong 0.65% expansion in non-durables; durables spending fell 0.1%. Spending on services was a little more subdued, rising 0.05% in June. Revisions to May’s data now puts real spending growth at 0.3% in that month, up a touch from the previously reported 0.2%.
The personal consumption price deflator rose 0.1% on the month, and 1.4% on a year-on-year basis. Core PCE rose 0.2% (month-on-month), translating into a 1.6% year-on-year rate – a slight uptick from the downwardly revised 1.5% rate of inflation recorded in May.
The personal saving rate nudged higher to 8.1% in June from 8.0% in May.

Key Implications

There were few surprises in today’s personal income and spending release for June. Friday’s preliminary GDP report signaled strong consumer spending growth in the second quarter, and historical revisions to personal income saw a strong upward revision to the saving rate.
A repeat of the 4.3% annualized growth in spending in the second quarter may prove tough to achieve this quarter. That said, June’s income growth and a healthy labor market bode well for another quarter of decent consumer spending. Still, caution is warranted especially further out on the horizon. Elevated economic and trade policy uncertainty and global economic headwinds could yet dent consumer confidence and impact spending, particularly if higher tariffs feed through to higher consumer prices.
Looking ahead to tomorrow’s interest rate decision, there is very little in this report to change the mind of the Committee. Core inflation remains below its 2% target, but largely due to transitory factors, and the U.S. consumer has been stalwart despite a more uncertain economic backdrop. Nevertheless, we anticipate that the Committee will announce a 25 basis point cut at tomorrow’s decision to ensure that financial conditions remain accommodative in this high risk environment.