Friday, August 1, 2014

Personal Income and Consumption both Grew 0.4% in June

Personal income grew 0.4% in June, as in May, according to the Bureau of Economic Analysis. Personal consumption also improved 0.4%, compared to 0.3% the month prior.

Dividend income led income growth, a pattern seen the last four months. Both wage growth and disposable income also grew 0.4%, as in May. Real personal consumption and real personal income both grew 0.2%, an uptick from 0.1% in May. Future consumer spending should benefit from positive wage growth and strong job creation.

While both durable and non-durable consumption contributed to overall consumption growth, durable contributed more, with a 0.5% increase.

Person income and consumption grew at the same pace, explaining why the savings rate remained at 5.3%. However, the BEA report included upward revisions to the savings rate for the past three years.

Inflation remained tame; the PCE deflator rose 0.2% in June and was 1.7% above year-ago levels. This was below the 2.0% target of the Federal Reserve, but overall second quarter inflation was higher than the previous quarter, indicative of a healthier economy. The Federal Reserve noted this past week that, “the likelihood of inflation running persistently below two percent has diminished somewhat.” However, the Federal Reserve noted that, “economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.”

Read the BEA release.

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