U.S. PCE Price Index Growth Remains Modest in July; Spending Growth Firms

The PCE chain price index rose 0.2% in July following a 0.1% advance in June and after holding steady in May. The 2.5% y/y rise is unchanged from June and compares to its 7.1% y/y peak in June 2022. The price index excluding food and energy rose 0.2% last month after similar gains in the prior two months. The steady 2.6% y/y increase remained the weakest since March 2021 and below the 5.6% peak in February 2022. The three-month annualized core PCE index rose 1.7%, the slowest this year. Durable goods prices declined 0.3% (-2.5% y/y) after being unchanged (-2.9% y/y) in June. They were helped by a 0.7% (-3.7% y/y) decline in motor vehicle prices, after a 0.6% decline (-3.6% y/y) in June. Nondurable goods prices rose 0.1% (1.3% y/y) in July, after a decline of 0.3% (+1.2% y/y) in June, with clothing prices posting a monthly decline of 0.3% (-0.1% y/y). Services prices rose 0.2% (3.7% y/y), the gain held back by a decline of 0.1% (+1.4% y/y) in transportation costs, the fourth consecutive monthly decline. Services prices excluding energy & housing increased 0.2% (3.3% y/y) in July, after a similar rise in June. Food prices edged 0.2% higher in July (1.4% y/y). Energy goods & services prices were unchanged (+1.9% y/y).

Personal consumption expenditures (PCE) increased 0.5% (5.3% y/y) in July, after a 0.3% (5.4% y/y) rise during June. A 0.4% increase had been expected in the Action Economics Forecast Survey. When adjusted for price changes, PCE rose 0.4% last month (2.7% y/y) after increasing 0.3% (2.8% y/y) during June.

Real spending on durable goods jumped 1.7% (3.4% y/y) in July, after a decline of 0.1% (+3.0% y/y) in June. Real spending on motor vehicles rose 4.1% (0.2% y/y) last month, after a decline of 2.4% (-2.6% y/y) in June. Real outlays on furnishings & durable household equipment rose 0.8% (4.3% y/y) following a rise of 1.6% (4.1% y/y) in June, and real spending on recreational goods & vehicles rose 0.3% (5.4% y/y) last month, after an advance of 1.5% (7.4% y/y) in June. Spending on other durable goods rose 0.7% (6.1% y/y) after a 0.8% (+6.1% y/y) decline in June.

Real spending on nondurable goods rose 0.2% (1.7% y/y) in July, after a rise of 0.5% (2.2% y/y) in June. Real clothing and footwear purchases edged up 0.1% (2.1% y/y) last month following the rise of 1.1% (3.8% y/y) in June. Real food & beverage purchases rose 0.6% (1.5% y/y), after a rise of 0.5% (1.3% y/y in June. Real outlays on gasoline & other energy products eased 0.1% (+0.9% y/y) last month after a decline of 0.4% (-0.2% y/y) in June. Real spending on other nondurable goods was flat (2.0% y/y) in July after a rise of 0.5% (3.1% y/y) in June.

Real spending on services edged up 0.2% (2.9% y/y) in July, following a 0.3% (3.0% y/y) rise in June. Real spending on housing & utilities rose 0.2% (1.1% y/y) in July for the third consecutive month, while real healthcare spending edged 0.3% higher (5.0% y/y) following a small 0.1% (5.0% y/y) decline in June. Real spending on food services & accommodations rose 0.3% (1.6% y/y) after a 0.1% (2.0% y/y) rise in June, while real spending on financial services & insurance rose 0.1% (0.3% y/y) last month, after a rise of 0.2% (0.4% y/y) in June. Real spending on transportation services increased 0.3% (4.5% y/y) in July after rising 0.5% in June (3.9% y/y).

Personal income rose 0.3% (4.5% y/y) in July after a rise of 0.2% (4.4% y/y) during June. A 0.2% gain was expected. Wages & salaries rose 0.3% (4.4% y/y) last month, following a rise of 0.2% (4.6% y/y) in June. Rental income jumped 1.0% (6.4% y/y) in July, after a third consecutive monthly decline of 0.7% (+6.0% y/y) in June. Proprietors’ income rose 0.6% (4.0% y/y) following no change (3.9% y/y) in June. Income from assets edged down 0.1% (+2.9% y/y) after rising 0.1% (3.1% y/y) in June and current transfer receipts rose 0.3% (6.1% y/y) in July after rising 0.4% (5.2% y/y) in June. Government social benefits rose 0.3% (6.0% y/y), after a 0.4% advance (5.1% y/y) in June.

Disposable personal income increased 0.3% (3.6% y/y) in July after a rise of 0.1% (3.5% y/y) in June. After adjusting for price changes, disposable income improved 0.1% (1.1% y/y) last month after a similar rise in June (1.0% y/y).

The personal saving rate fell to 2.9% last month from 3.1% in June, revised from 3.4%. The rate was down from a May 2023 high of 5.3%. Personal saving fell 7.5% (-32.8% y/y) in July after falling 5.6% (-34.0% y/y) in June.

The personal income and consumption figures are available in Haver’s USECON database with detail in the USNA database. The Action Economics forecasts are in AS1REPNA.