Great personal income data. Strong income growth. Moderate consumption growth. Prices down in the month of July--excluding food & energy up at only a 1.0% annual rate in the month. Consumers still financing spending out of savings. Lots of challenges but a good month. More soon.
Here is PCE inflation--or should I say deflation in the month of July.
Now core PCE inflation. One reason that while this month was great no one should (or hopefully will) get overexcited is that it follows an unusually bad month in June. As usual averaging over something like three months is a good way to think--and that is a 4% annual average.
Real disposable income per capita was up in July after sliding the falling the previous two months--and mostly falling for over a year now.
The details of personal income are interesting, following a pattern in previous months but even stronger for July, compensation grew strongly while proprietors & rental income fell. Good from a distributional perspective but could be worrying in terms of inertial inflation.
Personal consumption grew at a 2.5% annual rate, that is actually quite strong (would rephrase my first tweet, sorry looking quickly). Growth in both services (which have been shockingly steady) but also durable goods up at a 19.3% annual rate.
Here is where everything consumers spend compares to pre-pandemic trends. Durable goods still 11% above and services 4% below.
Finally, consumption growth this year has outpaced income growth. That has happened because the saving rate fell and is low. That's perfectly fine--consumers are smoothing, they still have assets in the bank and relatively low revolving debt. More is possible.
Bottom line: The biggest worry about this report is that it is nearly perfect.
The reason that is a worry: data is volatile, there are false dawns, so if anything time to double down on mission not at all accomplished.
But Powell can and should smile a little more this morning.
The reason that is a worry: data is volatile, there are false dawns, so if anything time to double down on mission not at all accomplished.
But Powell can and should smile a little more this morning.
P.S. The above focuses on the new news--what we learned about July 2022. We already knew what happened in August 2021 through June 2022 (with some revisions).
Inflation over 12 months is 6.3% (headline) and 4.6% (core).
But should look at the latest changes to update views.
Inflation over 12 months is 6.3% (headline) and 4.6% (core).
But should look at the latest changes to update views.
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