U.S. PCE Price Index Growth Remains Modest in June; Spending Growth Steadies

The PCE chain price index edged 0.1% higher in June after holding steady in May and rising 0.3% for three consecutive months. The 2.5% y/y rise is a three-year low for the measure and compares to its 7.1% y/y peak in June 2022. The price index excluding food and energy improved 0.2% last month after a 0.1% May gain, and also following three consecutive 0.3% increases. The steady 2.6% y/y increase remained the weakest since March 2021 and below the 5.6% peak in February 2022. Durable goods prices were unchanged (-2.9% y/y) after declining 0.8% in May and 0.2% in April. They were helped by a 0.6% decline (-3.6% y/y) in motor vehicle prices. Nondurable goods prices fell 0.3% (+1.2% y/y) after a 0.2% May slip, both held back by 0.3% declines (+0.2% y/y) in clothing prices. Services prices rose 0.2% (3.9% y/y) for the second consecutive month, the gain held back by the third consecutive decline (+2.8% y/y) in transportation costs. Services prices excluding energy & healthcare increased 0.2% (4.2% y/y) after a 0.1% rise. Food prices edged 0.1% higher in June (1.4% y/y) for a second consecutive month. Energy goods & services prices weakened 2.1% (+2.0% y/y) for the second consecutive month.

Personal consumption expenditures (PCE) increased 0.3% (5.2% y/y) during June following a 0.4% May rise, revised from 0.2%. A 0.3% increase had been expected in the Action Economics Forecast Survey. When adjusted for price changes, PCE rose 0.2% last month (2.6% y/y) after increasing 0.4% during May.

Real spending on durable goods fell 0.2% last month (+2.9% y/y) after increasing 2.3% in May. Real spending on motor vehicles weakened 2.6% (-2.8% y/y) and reversed the prior month’s increase. Real outlays on home furnishings & appliances strengthened 1.1% (3.6% y/y) after improving 1.2% in May while real spending on recreational goods & vehicles strengthened 1.3% (7.1% y/y) and added to the 2.9% surge May. Spending on other durable goods eased 0.1% (+6.9% y/y) after strengthening 1.4% in May.

Real spending on nondurable goods rose 0.5% (2.0% y/y) last month after edging 0.1% higher in May. Real clothing and footwear purchases jumped 1.1% (3.8% y/y), roughly repeating its May gain. These increases followed three straight months of decline. Real food & beverage purchases rose 0.3% (1.0% y/y) after easing slightly in May. Real outlays on gasoline & other energy products increased 1.1% (-0.9% y/y) after little change during the prior two months. Real spending on other nondurable goods rose 0.4% (3.0% y/y) after edging 0.1% higher in May.

Real spending on services improved 0.2% (2.8% y/y) in June for the second consecutive month. Real spending on housing & utilities rose 0.3% (1.7% y/y) after a 0.1% rise while real healthcare spending edged 0.1% higher (5.4% y/y) for the second consecutive month. Real spending on food services & accommodations eased 0.1% (+2.2% y/y) and reversed the May gain while real spending on financial services & insurance rose 0.4% last month (1.0% y/y) after easing 0.1% in May. Real spending on transportation services increased 0.2% in June (3.4% y/y) after rising 1.9% in May.

Personal income rose 0.2% (4.5% y/y) during June after increasing 0.4% in May, revised from 0.5%. A 0.4% gain was expected. Wages & salaries rose 0.3% (4.7% y/y) after a 0.6% gain. Rental income declined 0.7% (+6.0% y/y) for the third consecutive month while proprietors’ income was little-changed (+3.5% y/y) for the fourth consecutive month. Income from assets improved 0.1% (3.3% y/y) after two straight 0.4% increases and current transfer receipts rose 0.3% (5.1% y/y) for the second straight month. Government social benefits rose 0.3% (5.1% y/y) after rising 0.5% in May.

Disposable personal income increased 0.2% (3.6% y/y) in June following a 0.4% May rise. After adjusting for price changes, disposable income improved 0.1% (1.0% y/y) last month after rising 0.3% in May.

The personal saving rate fell to 3.4% last month from 3.5% in May, revised from 3.9%. The rate was down from a May 2023 high of 5.3%. Personal saving fell 3.0% (-28.3% y/y) after falling 1.2% in May.

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.