Personal Spending Slowed in June, with Income Growth Flat

The Bureau of Economic Analysis reported that personal spending inched up 0.1 percent in June, slowing from 0.2 percent growth in May. Personal consumption expenditures (PCEs) declined for both durable and nondurable goods, but service-sector spending increased.  We have seen spending pull back from more robust growth at the end of last year. To illustrate this shift, personal spending rose 2.9 percent at the annual rate in the first half of 2017, easing from the annualized 4.8 percent rate in the second half of 2016. On a year-over-year basis, personal spending has risen 3.8 percent.

Even with some easing, however, consumer purchases continue to expand at a decent clip. This can be seen in the saving rate data, which dropped to 3.8 percent in June. One year ago, the saving rate was 5.1 percent. This is a sign that Americans have accelerated their purchases in general over the past 12 months.

Meanwhile, personal incomes were flat in June, off from a 0.3 percent gain in May. Over the past 12 months, personal incomes have risen by a modest 2.6 percent in June, down from 3.4 percent in February and March. In addition, manufacturing wages and salaries edged up from $826.1 billion in May to $827.2 billion in June.

In other news, the PCE deflator was also flat in June. Reduced food and energy costs contributed to the decline in this release. 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 June 2016, the PCE deflator has increased 1.4 percent, its lowest year-over-year rate since November. Similarly, excluding food and energy, core inflation increased 0.1 percent in June, or 1.5 percent year-over-year.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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