US: Personal income and spending steady - Wells Fargo

According to analysts from Wells Fargo, today’s report on income and spending will make the Federal Reserve’s September and December decision on rates a little bit more difficult as they continue to show a relatively strong income and consumption performance.

Key Quotes:

“Personal income increased an expected 0.4 percent in July and was upwardly revised from 0.2 percent to 0.3 percent in June. Personal spending was also strong in July, up 0.3 percent, after an upward revision to June.”

“Personal income improved 0.4 percent during the first month of the third quarter to provide a good starting point to the quarter. Income was upwardly revised to 0.3 percent versus an original print of 0.2 percent in June. Meanwhile, disposable personal income also increased 0.4 percent during the month after an increase of 0.3 percent in June. Since PCE inflation was 0.0 percent in July that meant that real disposable personal income was also up 0.4 percent during the month. Personal income and disposable personal income numbers, both in nominal as well as in real terms, were also revised higher in May, painting a slightly better picture of the conditions of U.S. income even as growth in this variable has weakened over the past several quarters.”

“Personal spending continued to improve at the beginning of the third quarter. July’s personal spending increased 0.3 percent after an upwardly revised 0.5 percent in June. In real terms, personal spending also increased  0.3 percent after an upwardly revised 0.4 percent in the month of June.

“However, all these numbers will make the Federal Reserve’s September and December decision on rates a little bit more difficult as they continue to show a relatively strong income and consumption performance. Perhaps what is missing for the Federal Reserve is what is not happening in the rest of the components of GDP, that is, net exports, investment and government expenditures.”