The Bureau of Economic Analysis reported that personal spending rose 0.3 percent in July, extending the 0.2 percent gains in both May and June. (The June increase was revised up from an earlier estimate of 0.1 percent.) Durable and nondurable goods spending both increased in July. Since the spring, we have seen consumer spending pull back from robust growth, even as purchases continued to rise at a modest pace overall. In this report, personal spending increased 4.2 percent year-over-year, up from 4.1 percent in the prior release. To put that number in perspective, it was higher than the 3.8 percent year-over-year rate in July 2016 but off from the healthy 5.1 percent pace in March.
The saving rate mirrored the recent acceleration in spending, falling from 4.1 percent in February to 3.5 percent in July. That was the lowest level so far in 2017. For comparison purposes, the saving rate was 5.1 percent one year ago. This is a sign that Americans have stepped up their purchases in general over the past 12 months.
Meanwhile, personal incomes jumped 0.4 percent in July, rebounding after being flat in June. Over the past 12 months, personal incomes have risen 2.7 percent, the same rate as in June but down from 3.4 percent in February and March. In addition, manufacturing wages and salaries rose 0.8 percent from $830.7 billion in June to $837.5 billion in July.
In other news, the personal consumption expenditure (PCE) deflator edged up 0.1 percent in July. After seeing pricing pressures accelerate strongly earlier this year—with the PCE deflator peaking at 2.2 percent year-over-year in February—inflation has pulled back since then. Since July 2016, the PCE deflator has increased 1.4 percent, matching June’s rate, which was the lowest since November. Similarly, excluding food and energy, core inflation also increased 0.1 percent in July, or 1.4 percent year-over-year, a rate not seen since December 2015.