Washington D.C., USA : Personal income increased $60.3 billion (0.3 percent) in August according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $51.4 billion (0.3 percent) and personal consumption expenditures (PCE) increased $46.4 billion (0.3 percent).
Real DPI increased 0.2 percent in August and Real PCE increased 0.2 percent. The PCE price index increased 0.1 percent. Excluding food and energy, the PCE price index increased less than 0.1 percent.
The increase in personal income in August primarily reflected increases in wages and salaries, government social benefits to persons, and nonfarm proprietors’ income.
The $28.7 billion increase in real PCE in August reflected an increase of $15.3 billion in spending for goods and a $14.3 billion increase in spending for services (table 7). Within goods, other nondurable goods was the leading contributor to the increase. Within services, the largest contributor to the increase was spending for health care. Detailed information on monthly real PCE spending can be found in Table 2.3.6U.
Personal outlays increased $47.1 billion in August (table 3). Personal saving was $1,032.3 billion in August and the personal saving rate, personal saving as a percentage of disposable personal income, was 6.6 percent
August’s increase in consumer spending was in line with economists’ expectations.
The report came on the heels of data on Thursday showing a decline in orders for key capital goods in August and a further widening of the goods trade deficit, which prompted economists to downgrade their gross domestic product estimates for the third quarter to as low as a 2.8 percent annualized rate.
The economy grew at a 4.2 percent pace in the second quarter, powered by robust consumer spending as well as farmers front-loading soybean exports to China before Beijing’s retaliatory tariffs came into effect in early July.
The United States and China are embroiled in an escalating trade war. Economists have warned that the increasingly bitter trade fight could undercut business and consumer spending.
In August, spending on goods increased 0.3 percent, likely lifted by higher gasoline prices. Outlays on services advanced 0.4 percent, with spending on healthcare accounting for much of the increase.
There was a moderation in monthly price gains in August. The personal consumption expenditures (PCE) price index excluding the volatile food and energy components was unchanged after rising 0.2 percent in July.
That left the year-on-year increase in the so-called core PCE price index at 2.0 percent. The core PCE index is the Fed’s preferred inflation measure. It hit the U.S. central bank’s 2 percent inflation target in March for the first time since April 2012.
The Fed raised interest rates on Wednesday for the third time this year, and Chairman Jerome Powell told reporters that policymakers expected inflation to remain at the central bank’s target “on a sustained basis.”
In August, personal income rose 0.3 percent after increasing by the same margin in July. Wages jumped 0.5 percent. The saving rate was unchanged at 6.6 percent last month.
Consumer spending (Personal Consumption Expenditures) accounts for a majority of overall economic activity. It’s one of the most important gauges of economic health due to the vast ripple effect consumer buying creates in the economy
Other Economy News – U.S. dollar and stocks gain
The U.S. dollar and stocks gained on Friday.
MSCI’s gauge of stocks across the globe shed 0.12 percent. The picture was rosier on Wall Street, where tech shares also got a big boost from Nvidia Corp, which rose after Evercore raised the chipmaker’s price target to $400.
The Dow Jones Industrial Average rose 43.24 points, or 0.16 percent, to 26,483.17, the S&P 500 gained 3.12 points, or 0.11 percent, to 2,917.12 and the Nasdaq Composite added 7.18 points, or 0.09 percent, to 8,049.14.
The dollar index rose 0.17 percent.
Benchmark 10-year notes last rose 4/32 in price to yield 3.0426 percent, from 3.055 percent late on Thursday.
Energy stocks also got a boost from oil prices, with Brent crude climbing to a fresh four-year high as U.S. sanctions on Tehran squeezed Iranian crude exports.
U.S. crude rose 1.58 percent to $73.26 per barrel and Brent was last at $82.89, up 1.86 percent on the day.