Personal spending edges higher amid signs of distressed consumer

Summary

After adjusting for inflation, the 0.1% June gain in real personal spending retraces only a portion of the prior month's decline. This morning's data largely confirm what we gathered from yesterday's Q2 GDP data: Consumer spending slowed materially in the first half of the year.

Consumer spending is slowing materially

Consumer spending rebounded in June, though the 0.3% gain was a bit short of the Bloomberg Consensus expectation. Prices are rising almost as fast as spending is. Both the headline and core PCE deflators notched gains of 0.3% in June. After adjusting for rounding, that puts the real increase in consumer spending at a comparatively modest 0.1%.

Coming on the heels of a 0.2% decline in real spending in May, this means on an inflation-adjusted basis, consumer spending is still down over the past couple of months. Most of the decline is tied to durable goods purchases, where spending fell the past three consecutive months and is down in five of the first six months of the year. Real durable goods spending is now down 3.0% since December, consistent with our theme of a trend decline in discretionary spending, which is still underway.

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