Personal income inched up 0.2 percent in July after an upwardly-revised 0.5 percent increase in June. However, spending dropped 0.1 percent, marking a very weak start for consumption in Q3.
Personal Income Weak But Previous Month Revised Up
Personal income was weak in July, growing just 0.2 percent after an upwardly-revised 0.5 percent growth in June. Disposable personal income was lower, growing just 0.1 percent, with a similar rate for real disposable personal income. Private wages and salaries increased only $12.9 billion in July after increasing by almost double in the previous month. Most of the weakness was in wages and salaries of goods-producing industries, whose payrolls increased just $0.7 billion compared to $8.8 billion in June. Service-sector wages and salaries were also relatively soft in July, rising $12.3 billion compared to $16.8 billion in June. Another big difference for personal income in July was a decrease of $2.7 billion in proprietors’ income, after a strong $11.9 billion increase in June. The biggest culprit within this category of personal income was a $9.0 billion decrease in farm proprietors’ income after an increase of $6.7 billion in the previous month.
Weak Start for Consumption
The start of the third quarter was even weaker for personal consumption as personal consumption expenditures fell 0.1 percent, the first drop since January of this year when it decreased 0.2 percent. Furthermore, real personal consumption expenditures, which goes into the calculation of PCE in the national accounts, decreased 0.2 percent during the month, an even weaker start for the quarter. This decline meant that personal outlays, which includes personal consumption expenditures, personal interest payments and personal current transfer payments declined $12.0 billion compared to an increase of $51.2 billion in June, a $63 billion swing. The biggest culprit, of course, was a $13.6 billion decrease in personal consumption expenditures compared to an increase of $50.5 billion for the month of June.
Within real personal consumption expenditures, durable goods purchases went down 0.6 percent after increasing 0.5 percent in June with a decline in motor vehicles & parts accounting for almost the entire July drop. The only good news of this report was the fact that weaker consumption compared to income caused the personal saving rate to increase further in July, to 5.7 percent from 5.4 percent in June. This paves the wave for a pickup in personal consumption expenditures later this year, especially if the labor market continues to deliver the numbers it has seen during the first seven months of the year.
Given this report there are probably going to be revisions to third quarter GDP even though there are still two more months to go in the quarter and data could also be revised in coming months. Knowing that the saving rate increased should be enough to keep those revisions range bound.
Personal Income Weak But Previous Month Revised Up
Personal income was weak in July, growing just 0.2 percent after an upwardly-revised 0.5 percent growth in June. Disposable personal income was lower, growing just 0.1 percent, with a similar rate for real disposable personal income. Private wages and salaries increased only $12.9 billion in July after increasing by almost double in the previous month. Most of the weakness was in wages and salaries of goods-producing industries, whose payrolls increased just $0.7 billion compared to $8.8 billion in June. Service-sector wages and salaries were also relatively soft in July, rising $12.3 billion compared to $16.8 billion in June. Another big difference for personal income in July was a decrease of $2.7 billion in proprietors’ income, after a strong $11.9 billion increase in June. The biggest culprit within this category of personal income was a $9.0 billion decrease in farm proprietors’ income after an increase of $6.7 billion in the previous month.
Weak Start for Consumption
The start of the third quarter was even weaker for personal consumption as personal consumption expenditures fell 0.1 percent, the first drop since January of this year when it decreased 0.2 percent. Furthermore, real personal consumption expenditures, which goes into the calculation of PCE in the national accounts, decreased 0.2 percent during the month, an even weaker start for the quarter. This decline meant that personal outlays, which includes personal consumption expenditures, personal interest payments and personal current transfer payments declined $12.0 billion compared to an increase of $51.2 billion in June, a $63 billion swing. The biggest culprit, of course, was a $13.6 billion decrease in personal consumption expenditures compared to an increase of $50.5 billion for the month of June.
Within real personal consumption expenditures, durable goods purchases went down 0.6 percent after increasing 0.5 percent in June with a decline in motor vehicles & parts accounting for almost the entire July drop. The only good news of this report was the fact that weaker consumption compared to income caused the personal saving rate to increase further in July, to 5.7 percent from 5.4 percent in June. This paves the wave for a pickup in personal consumption expenditures later this year, especially if the labor market continues to deliver the numbers it has seen during the first seven months of the year.
Given this report there are probably going to be revisions to third quarter GDP even though there are still two more months to go in the quarter and data could also be revised in coming months. Knowing that the saving rate increased should be enough to keep those revisions range bound.
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