• Personal income forecast to fall 2.4% August after dropping 0.4% in July.
  • Personal consumption expected to rise 0.8% in August.
  • Core PCE price index to be 0.3% m/m 1.4% y/y.
  • Jobless claims predicted to drop to 850,000, continuing to 12.225 million.

Personal income and spending continued their recovery but the slowing pace suggests the waning stimulus funds may cap gains in future months.

Personal spending, officially Personal Consumption Expenditures (PCE), is expected to climb 0.8% in August after increasing 1.9% in July. After plunging 19.6% in March and April during the mandated lockdowns spending has come back 16.6% through July.

Personal spending


Personal income is projected to drop 2.4% in August following a 0.4% slip in July. In the five months through July income is higher by 5.3%.

Income figures are deceptive because they rose as lower paid workers were laid-off in April, making it appear that the remaining employees received increases,  and then fell in subsequent months as many returned to their jobs.

The core PCE price index y/y is forecast to rise 0.1% to 1.4% in August. On the month it should be unchanged at 0.3%.

Initial Jobless claims are projected to decrease to 850,000 in the September 25 week and continuing claims are expected to be 12.225 million in the September 18 week.

Spending, inflation and income reporting

The income and spending numbers from the Bureau of Economic Analysis, a division of the Commerce Department cover the same ground as the prior releases for retail sales from the Census Bureau and wages from the Labor Department.  As such they tend to repeat the information and normally have little differential impact on markets of economic views.

The same is true for the PCE Price Index which reprises the CPI data for August already released on September 11.  In the past, because the PCE Index is the inflation measure preferred by the Federal Reserve, its core rate was monitored for hints to central bank policy. But with the Fed on self-proclaimed extended hold through the end of 2023, inflation is an economic sidelight.

Retail Sales

Sales slowed in August, rising 0.6% on a 1% forecast and down from July’s 0.9% gain. 

The six-month average of 0.87% and an overall gain of 5.2%in sales for the half-a-year from March to August would, in normal times, be considered a robust if not booming consumer economy.

Retail sales



The May and June jump in sales was hardly surprising. Large sections of the US economy were ordered closed in March and April but life did not halt, it was just put on hold. 

Figures for September and the fourth quarter will be the telltales for a return to normality.  If declines in July and August sales do not represent a return to usual levels of consumption but begin a lower trend that manifests into the Christmas season then the outlook for the US economy will darken. The September Retails Sales numbers will be issued by the Commerce Department on Friday October 16. Wage figures for September will be issued in the Employment Situation Report on Friday October 2.

Consumer Sentiment

Consumer sentiment in the Michigan Survey Index was 78.9 in September, up from the pandemic low of 71.8 in April but well beneath the February list at 101.  

The Conference Board Consumer Confidence Index in September soared to 101.8 for the largest one month jump in 17 years. A modest improvement to 89.2 from 86.3 in August had been the consensus forecast.

Washington stimulus

 Republicans and Democrats in Congress have restarted negotiations on a second pandemic relief bill though the prospects for success are complicated by the looming presidential election.  Aspects of the first bill passed in March have expired, primarily the $600 a week supplemental federal unemployment benefits. President Trump has extended the insurance by executive order but at a lower level of payments.  

Both sides profess to want a new package but with the vote barely one month away neither party is likely to compromise on any provision that might aid the opposition on November 3.   

Conclusion and markets

The August personal and income numbers are essentially old information, repeating data previously released in retail sales and wages.  It is the main reason their impact has always been limited.

Markets are already contemplating the September employment and wages figures in Friday’s Non-farm payrolls report and Retail Sales on the 16th.  The Commerce Department numbers will provide a few additional details to an story already told.  



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