Personal income for Americans rose by 0.3 percent in July, according to a new report from the U.S. Department of Commerce. That was in line with expectations and the 29th monthly gain in a row. Wages and salaries rose 0.4 percent in July, and disposable income (earnings adjusted for taxes and inflation) advanced 0.2 percent. During this same period consumer spending, which accounts for more than two-thirds of the economy (GDP), lifted by 0.4 percent.
That was the 5th consecutive monthly increase but also the smallest gain since February as the tax refund boost continues to fade. Although the healthy rise in spending bodes well for third quarter gross domestic product growth, the sustainability of Americans’ consumption remains uncertain with revolving credit (credit card) reliance already elevated, personal saving falling to a 7-month low, and inflationary pressures picking up. Moreover, the Federal Reserve’s preferred measures of household price changes rose in July to the highest level since 2012, which should only strengthen the Fed’s case for raising interest rates at next month’s Federal Open Market Committee (FOMC) meeting.
Sources: Econoday, U.S. DoC, ZH, Twitter, Bloomberg, FRBSL
Post author: Charles Couch