Stronger Income and Consumption in June

Personal income and consumption increased 0.4 percent in the last month of the second quarter even though inflation has continued to put a dent in the real numbers. Real income and consumption rose 0.2 percent.

Personal Income Did Not Disappoint in June

Personal income did not do that badly during the second quarter of the year, although it remained short of the stronger performance shown in the first quarter. The 0.4 percent increase in June, which was the same as the release in May, closed a quarter that raised questions about the stability of the economic recovery. After the release of a strong 4.0 percent GDP number for the second quarter, however, the questions seem to have subsided and expectations for continued growth seem to have taken over.

The only negative aspect of this report is that inflation has continued to take a bite out of income, especially compared to the first quarter of the year. Nominal disposable personal income increased 0.4 percent in June, but real disposable personal income was up only 0.2 percent, the third-consecutive 0.2 percent increase. However, this is lower than the  0.6 percent recorded in February and the 0.5 percent recorded in March. A large part of the increase in personal income was due to an increase of $5.8 billion in proprietors’ income in June compared to an increase of only $0.1 billion in May. This increase was counteracted by a $4.4 billion increase in personal current transfer receipts in June versus an increase of $15.3 billion in May. 

Personal Consumption Improved as the Quarter Progressed

Personal consumption expenditures improved as the quarter progressed with the last month of the quarter rising 0.4 percent. May’s growth was revised up to 0.3 percent from 0.2 percent. In real terms, however, we can also see how inflation has taken some air from the ability of consumers to consume goods and services, with real personal consumption expenditures increasing just 0.2 percent in June after a 0.1 percent increase in May and a 0.1 percent drop in April. The increase in real PCE in durable goods was 0.4 in June after a strong 1.3 percent increase in May, which confirms the strong performance of durable goods consumption reported in the second quarter GDP release. 

Benchmark Revisions Were Reported in June

This report also included benchmark annual revisions to the national income and product accounts (NIPA). While revisions to all these numbers were relatively small for 2011 and 2013, there were relatively large revisions to the 2012 data. Disposable personal income was revised up by 1.1 percent in 2012 from the original number, while 2011 and 2013 were revised up by 0.1 percent and 0.2 percent, respectively. Real disposable personal income had similar revisions with the 2012 number revised up to 3.0 percent from 2.0 percent. These revisions in 2012 were seen across the board and were significantly larger relative to the 2011 and 2013 numbers.