U.S. Personal Spending Picks Up but Income Slips in June; Inflation Edges Higher

Personal consumption expenditures (PCE) increased 0.5% during June (5.4% y/y) following a 0.2% May rise, revised from 0.1%. A 0.4% gain had been expected in the Action Economics Forecast Survey. Adjusted for price increases, real PCE rose 0.4% after gaining 0.1% in May. The y/y rise of 2.4% in real PCE was the strongest since February.

Real spending on durable goods rose 1.7% (4.7% y/y) in June after slipping 0.3% in May. Spending on motor vehicle & parts rose 2.2% (7.1% y/y) after falling 3.2% in May. Real spending on furniture & appliances rose 1.2% (2.0% y/y) after strong gains in both of the prior two months. Real spending on recreational goods & vehicles surged 1.8% (6.9% y/y), about as it did in May.

Real spending on nondurable goods rose 0.4% last month (0.6% y/y) after easing 0.1% in May. Real apparel spending improved 0.2% (-0.3% y/y) after a 0.1% slip. Outlays on gasoline & other energy products surged 1.6% (4.9% y/y) last month following a 0.2% decline in May while real food & beverage outlays were little changed (-1.5% y/y) following a 0.1% gain.

Real spending on consumer services edged 0.1% higher (2.5% y/y) in June after a 0.2% May rise. Financial services & insurance expenditures surged 1.3% (3.6% y/y) after a 0.4% May increase. Recreation services buying rebounded 1.3% (4.5% y/y) after falling 0.6% in May but real hotel & restaurant spending slipped 0.1% (+1.9% y/y) following a 0.3% improvement. Real transportation services outlays fell 0.6% (+2.0% y/y) after two months of strong increase while real housing & utilities expenditures eased 0.1% (+1.2% y/y) and reversed the May improvement. Real healthcare spending gained 0.1% (6.0% y/y) in June for the second consecutive month.

Personal income rose 0.3% (5.3% y/y) after increasing 0.5% in May, revised from 0.4%. A 0.5% rise had been expected. The gain reflected a 0.6% increase (6.0% y/y) in wages & salaries which followed a 0.5% increase in May. Proprietors' income rose 0.3% (3.7% y/y) last month after rising 0.2% in May. Rental income rose 0.4% (9.5% y/y) after two consecutive 0.3% gains. Receipts on assets fell 0.2% (+4.4% y/y) after two straight 0.5% gains. Interest income rose 0.7% (7.0% y/y) for the third consecutive month but dividend income declined 1.2% (+1.6% y/y) following a 0.2% gain. Personal transfer receipts eased 0.1% (+4.6% y/y) in June after rising 0.4% in May.

Disposable personal income rose 0.3% (7.9% y/y) in June following a 0.5% rise in May. Taxes rose 0.1% (-9.5% y/y) after holding fairly steady in May. Real disposable earnings rose 0.2% (4.7% y/y) last month, following a 0.4% May gain.

The personal savings rate fell to 4.3% in June from 4.6% in May. It remained near the highest rate since January 2022 and higher than the 2.7% low in June 2022. The level of personal savings fell 4.6% (70.3% y/y) last month.

The PCE chain price index rose 0.2% (3.0% y/y) last month after a 0.1% May gain. The index excluding food & energy rose 0.2% (4.1% y/y), the smallest increase since November and down from the 0.6% August high. Goods prices eased 0.1% (-0.6% y/y), as they did in May, while services prices gained 0.3% (4.9% y/y), also as they did in May. The PCE services price index excluding energy & health care increased 0.3%, down from highs of 0.7% in both August & September of last year. Its 5.9% y/y change is reduced from a 6.7% February high. Energy prices rose 0.6% (-18.9% y/y) in June following a 3.8% decline, while food prices edged 0.1% lower (+4.6% y/y) after little change during the prior three months.

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.