Consumer Spending and Personal Income

Consumer Spending and Personal Income

August 1, 2017 – Consumer spending, measured by Personal Consumption Expenditures (PCE), makes up approximately two-thirds of the economy and is a direct measure of purchasing activity.  We see where consumers are spending their dollars, whether it be durable and nondurable goods, or on services.  Changes in the personal income level dictate consumer spending.

Personal income was unchanged in June, below expectations of a 0.4% increase after May was downwardly revised to an increase of 0.3%. Right in line with consensus expectations, consumer spending increased 0.1% for the month but the previous month was bumped up 0.1% to a 0.2% increase. Wages and salaries managed an increase of 0.4% after a weak month before. The PCE index stayed in line with expectations, with no change and with core PCE (excluding food and energy) increasing 0.1%. PCE is up 1.4% year-over-year and core PCE is up 1.5% over the last year.

Consumer spending has slowed in recent months as income did not budge in June. This is reflected in a decrease in the savings rate to 3.8%, low by historical standards. Spending was strongest for services with an increase of 0.1%. Nondurable goods and durables both decreased 0.2% in June. Consumer spending appears to be held back in June by a lack of income as spending increased slightly even without matching income growth.

Consumer Spending and Personal Income