Those expecting the relatively strong second-quarter consumer spending to continue in the third quarter may wish to reconsider.
The BEA reports Personal Income in June was flat vs an Econoday consensus estimate of a 0.4% gain. Moreover, the BEA revised May lower, from 0.4% to +0.3%.
It’s hard to detect much life in any part of the personal income & outlays report. Income couldn’t muster a gain in June, coming in unchanged with May revised 1 tenth lower to a 0.3 percent gain. Consumer spending did make the plus column but with only a 0.1 percent gain though May gets a 1 tenth upgrade to 0.2 percent. Price data are flat, unchanged in the month with the core rate (less food and energy) up 0.1 percent for a second weak month in a row. Year-on-year, overall prices are up only 1.4 percent with the core little better at 1.5 percent.
The weakness in income, at least for June, isn’t due to weakness in wages & salaries which rose 0.4 percent following, however, only a 0.1 percent gain in May. Proprietor income fell in the month with interest income flat and rental income and transfer receipts up. The breakdown for spending shows a second straight 0.3 percent gain for the largest component which is services but 0.4 percent declines for both durable and non-durable goods.
What little spending did appear in June may have come from savings, at least slightly, as the savings rate fell 1 tenth to a thin 3.8 percent rate. There are plenty of jobs in the economy but wage growth is sub par and with it both consumer spending and inflation are flat. These results do not point to much consumer momentum going into the third quarter.
Income, Outlays, Inflation
Consumers like falling prices but the Fed sure doesn’t. Expect to hear more “transitory” comments from Janet Yellen.
The third quarter is not exactly getting off on the right foot. Today’s construction spending report was also very anemic. For details, please see Construction Spending in June Collapses: Negative Second Quarter GDP Revisions Coming Up?
We are starting to get strong hints already that the GDP bounce in the second quarter will be short lived.
Mike “Mish” Shedlock
Tony Bennett said:
“The weakness in income, at least for June, isn’t due to weakness in wages & salaries which rose 0.4 percent following, however, only a 0.1 percent gain in May”
Bloomberg embarrassing itself … as usual. Do the twenty somethings who do these write ups … or their editors … bother to scratch below the surface …. or even aware that you can?
Though technically right. Another failure to take into account revisions.
Prior report Wages and Salaries. Numbers are SAAR
March … $8.3338 trillion
April … $8.3773 trillion
May … $8.3839 trillion
March … $8.2536 trillion
April … $8.3006 trillion
May … $8.3128 trillion
June … $8.3437 trillion
Go to Table 1 line 3
Tony Bennett said:
Consensus on July new vehicle sales … 16.8 million SAAR
Actual … 16.69 million SAAR
GM took a beating. Total sales -15.4% year over year. Dealer inventory still very high at 104 days.
2018 models about to hit showrooms …
Ron J said:
“GM took a beating. Total sales -15.4% year over year.”
As Bernanke would say, don’t worry, it’s confined to subprime.
Jarhead John said:
Focus on Dr. Greenspan instead of doctored GDP numbers compadres…Today he warns: The debt market is in a bubble and interest rates could rise sharply…I seem to
recall a similar sentiment by the Maestro about a”frothy” housing bubble just before it collapsed…
As a bond holder, (UST zero-coupons, lots of them) if it were anyone BUT Greenspan making that call, I might be somewhat worried.
His pathetic track record as a private economic forecaster was what got (forced) him into the government sector.
Jarhead John said:
LOL…Even a broken clock is right twice a day….Time literally will tell… 🙂
I seem to recall a similar sentiment by the Maestro about a frothy housing bubble just before it collapsed
Reblogged this on World4Justice : NOW! Lobby Forum..
Proprietor income down sharply. The big corporations are bearing down. Their spike in profits, besides the weaker dollar, comes from squeezing not only their workers, but their suppliers and contractors. It certainly does not come from volume growth which is anaemic.