Announced this morning, Personal Income grew 0.3% in June, less than expected with the previous month revised higher. In addition, Personal Spending grew 0.5% in June, more than expected and higher than the previous month. Real Personal Spending which accounts for inflation grew 0.4% in June, more than the 0.1% increase in May. Meanwhile, the personal savings rate as a percentage of disposable income was 4.3%, a slight decrease from previous levels.
Looking at inflation, the PCE Deflator grew 0.2% in June as expected and increased by 3.0% on an annual basis. The Core PCE Deflator, which excludes food and energy prices and is closely monitored by the Federal Reserve, also increased by 0.2% in June, as expected but only one-tenth lower than the previous month. Core rates grew 4.1% on an annual basis, a decrease from the previous month but still above the Federal Reserve’s target.
Overall, in June both personal income and spending increased, with income less than expected and spending a bit higher than estimates. Consumers are hanging in there despite the Federal Reserve maintaining tight monetary policy. Meanwhile, headline and core inflation measures increased in the month while annual figures have moderated from previous levels. The annual change for core inflation is moving in the right direction, but still more than double the Federal Reserve’s target. How long consumers can continue to spend amidst this backdrop and the outlooks cited in upcoming earnings reports will remain key for the markets in the coming weeks.
In all, the 10-year US Treasury yield initially moved lower this morning after breaching 4% yesterday but ticked up following the data, and equity futures are higher as we head into the market open.
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