Personal income for Americans rose by 0.3 percent in August, according to a new report from the U.S. Department of Commerce. That was slightly worse than expected but still the 30th monthly increase in a row. Contributing to August’s gain were wages and salaries, which jumped by 0.5 percent last month, the largest increase since January. Disposable income also improved in August, but the personal saving rate, i.e. personal saving as a percentage of disposable personal income, held at 6.6 percent. That matched the lowest level of saving since 2017 even as consumer spending rose at the slowest pace in half a year.
Specifically, personal spending, which accounts for roughly 70 percent of the U.S. economy (GDP) rose by 0.3 percent in August. That was in line with estimates but the smallest monthly gain since February. Even though measures of consumer confidence remain elevated, the latest slowdown in consumption is not too surprising because the lower rate of saving and higher utilization of revolving credit (credit cards) support the argument that faster wage gains will be needed for spending to increase going forward. On the bright side, the Federal Reserve’s preferred measure of household inflation rose at a slower pace in August, and projections released by the Federal Open Market Committee earlier this week suggest that the upward pressure on consumer prices may cool in 2019.
Sources: Econoday, U.S. DoC, ZH, Bloomberg, FRBSL
Post author: Charles Couch