Personal income rose 0.2% in August, as economists expected. However, consumer spending rose 0.0% vs. the Econoday Consensus estimate of 0.2%.
The personal consumption expenditures (PCE) price index came in at +0.1% vs. a consensus of +0.2%. Last month the PCE was flat. This certainly is not what the Fed expected or wanted.
Year-over-year, PCE is up 1.0%, with the core PCE (excluding food and energy) up 1.7%.
Highlights
August was a soft month for the consumer, both for income and especially for spending. Income rose only 0.2 percent in the month as wages & salaries, which had been on a 4-month surge, could inch only 1 tenth higher in August. Consumer spending, which had also been on a 4-month winning streak, came in unchanged as durable goods declined, largely reflecting monthly weakness in vehicle sales, as did non-durable goods, in part reflecting low fuel prices. Service spending advanced, at plus 0.3 percent, but at a slower rate than prior months. Despite the weakness in income, the consumer put money into savings which are at a 5.7 percent rate for a 1 tenth gain and a special factor that held down spending.
Inflation readings do show more life with the PCE price index up 0.1 percent and the core up 0.2 percent, both 1 tenth better than the prior month. Year-on-year, the overall measure rose 2 tenths to 1.0 percent with the core up 1 tenth to 1.7 percent and inching toward the Fed’s 2 percent goal.
For policy makers, what strength there is in prices is probably offset by the softness in income and spending. But the results of this report are no surprise, ultimately reflecting what was only a moderate gain for payrolls in August.
Recent History
Consumer spending posted a solid 0.3 percent gain in July despite softness in core retail sales during the month. Weakness in total retail sales in August has forecasters calling for only a 0.2 percent gain. Personal income has also been solid, boosted in June and July by outsized 0.5 percent gains in wages & salaries. But forecasters see August income also slowing to plus 0.2 percent. Modest strength following a run of weakness is expected for both the PCE price index and the core PCE price index where forecasters are calling for 0.2 percent gains for each.
Mike “Mish” Shedlock
“Consumer Spending Falls Flat”
Looks like the Atlanta FED Nowcast is falling flat, as well.
Consumers saving for Obamacare increase.
Consumer spendinng falls flat
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Inventory building
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But not to worry. The coming (in one already?) recession will clear the deck for expansion … a couple of years from now.
Mish, all the data does not matter. The data is so very bad already and the S&P is up 19 points today. Can anyone explain this? The FED is only interested in keeping the S&P up. This gives everyone the feeling of wealth. Keeping in mind that the FED is buying through their Hedge Fund conduits, especially those using High Frequency Trading. They will keep the “manipulated market” up indefinitely. So with all due respect, you and all the other blogs that constantly focus on “gloom and doom.” You are wasting your time.
The Fed is not buying stocks via hedge funds. Good Grief
I think that the recession is getting near the end. If interest rates would move up some, the economy would improve.
Rate rises would hurt the stock bubble but help the rest of the economy to value risk and investment.
We are seeing increases in durable B to B goods sales (anecdotal evidence). Much better than the spring of the year. It’s not growth of significance but the slide has stopped.
We hope.
B2B is ripe for financial games. For instance, an IT company needs a roll of cable for a project early next year. The cable is purchased this year by the IT company and invoiced to the customer this year to show sales and profits this year. These games may go unnoticed until new orders slow way down.
I do not see any sign of recovery. When I see real employment growth AND retail sales putting together a couple of growth months then I will start thinking recovery. Start thinking. In the meantime companies already say lower comps to last years lower comps to the prior years.
Theoretically we need to bottom out before we have a recovery. And the recovery cannot just be a price recovery or higher healthcare prices.
one first sign is to see the average workweek increase other than ahead of xmas.
Its almost time to start the holiday season. First retailer to get whats left of the consumers money wins.
BTW–Lester Holt used the income and poverty report to declare this past Monday that we have a record number of jobs created the past 6 years and now a return to household earnings growth. He said it in his first question of the debate.
go get the income and poverty report and look at page 21, appendix a–it shows the 18 components of income for that report including welfare and estate and trust income, as well as some other gems. Its all BS.
The average Joe Plumber got a 2% pay increase in line with CPI — some got more, some less, but on average…
ObamaCare insurance extortion fees increased by 20-30%, with healthcare spending representing 15% of GDP (actually more, I rounded down).
Multiply 20% Obamacare fraud costs times 15% –> Obamacare alone is a 3% cost increase (to say nothing of college costs, property taxes, food / energy costs, rent/mortgage).
For many US citizens, Obamacare extortion increases were a lot more than 20% yoy increase. And by many estimates, healthcare is more than 15% of GDP in the USA. This means the health extortion cost guess of 3% underestimates what many consumers are experiencing.
If your pay increases 2%, and your costs increase by *at least* 3% — obviously that leaves less money for other spending.
Janet Yellen, like Congress and Supreme Court jesters and Obama, are not on ObamaCare. They get better care, better coverage, and their health costs are paid for by taxpayers. They have absolutely no connection to real world costs.
College economists get healthcare that is heavily subsidized by students (who generally need little if any care, but are forced to pay a health fee to the college anyway). Again, they have no connection to reality.
Politicians and college professors never experience real world budgets — they have outdated regression models (that were of limited accuracy decades ago). They don’t drive decisions on reality, they haven’t experienced reality in decades.
Why do US voters think a bunch of privileged and sequestered politicians can somehow relate to what goes on outside their world?
“However, consumer spending rose 0.0% vs. the Econoday Consensus estimate of 0.2%.”
Does it include all medical expenses. If not, there’s your reason/culprit.