The personal income and spending report showed a larger than expected number, while the inflation indicator came in below market consensus. Analysts at Wells Fargo see a transition to discretionary spending clearly underway. They point out the days of stimulus checks and buying stuff are gone.
“Personal income increased 0.1% in June and spending increased 1.0%; both numbers exceeded consensus expectations. Some of the fanfare of today's better-than-expected outturn was uncorked in yesterday's initial estimate for GDP growth.”
“For the third consecutive month, every major category of services spending moved higher. We also reached a milestone on the road to recovery as June marked the first month that services spending finally crested above its pre-pandemic level; in fact services spending is half a percentage point higher today than it was before the pandemic.”
“Last March and April, discretionary spending plummeted 54%, and has been clawing its way out on trend ever since. The transition to stronger spending here was evident in June as discretionary services rose 3.2% compared to a 0.5% gain in non-discretionary categories. That puts the peak-to-current figure at just 7.2% below their pre-pandemic level.”
“Personal income growth would have been stronger if it were not for dwindling stimulus. While overall personal income only rose 0.1% in June, if excluding transfer payments, income rose a stronger 0.7% over the month.”
“Still the overall trajectory of income growth will likely be flat to slightly down over the next four months or so. The confluence of factors from the expiration of all enhanced unemployment benefits in early September and PPP loans rolling out of proprietors income will more than offset upward momentum from employee compensation and the enhanced child tax credit being sent to many households. But, once stimulus rolls out of the income calculations, we expect income growth to settle on a more normal upward trajectory.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.