US consumers dug further into savings to fund purchases in July as disposable income held steady. Data from the Bureau of Economic Analysis reported increases for both the personal consumption expenditure (PCE) and core PCE measures of inflation.
The headline PCE price index increased 0.2% m/m in line with the last report. Annually, the index rose an in-line 3.3%, up three-tenths from June’s read. In the three months to July, the increase was a 2.1% annualised rate.
One of the Fed’s favoured gauges of inflation, core PCE gained 0.2% on the month, which matched estimates and the previous number. On the year, it crept up a tenth from the prior result to 4.2%, which was also the forecast.
Experts said the rise in the year-on-year core print was due to adverse base effects but noted that this indicator was still more than double the Fed’s target rate of 2.0%.
Ben Ayers, senior economist at Nationwide, said, “Core PCE readings could decline again in coming months given sharper increases over the second half of 2022, but a return to trend remains far off into the future.”
Ayers noted that core services ex-housing – the so-called super-core PCE – rose 4.5% in July versus 3.8% in June. “This undercuts the narrative that underlying is cooling and should be concerning for Fed officials heading into the September FOMC meeting.”
Savings continue to underpin spending
The BEA reported that real personal income increased at a monthly rate of 0.2%. On an adjusted basis, PCE increased 0.8%, a modest beat versus 0.7% predicted, and the upwardly revised 0.6% of June.
“While wages continue to rise sharply, job gains slowed this summer while the average workweek matched a 3-year low in July as employers cut back on worker hours,” Ayers explained. “This is typically a first step towards eventual job cuts but that has not played out more broadly to this point.”
A deeper dive into the drivers of the July outturn highlights that the 0.6% increase in real PCE in July reflected an increase of 0.9% in spending on goods and an increase of 0.4% in spending on services.
Oxford Economics postulated that with the personal savings rate declining to 3.5%, from 4.3% on the month, savings will be exhausted in the coming quarters, coinciding with a downturn in the employment situation. Lead US economist Michael Pearce said, “The upshot is that we expect the consumer will begin to falter in the months ahead, as those savings run out and the labour market cools further. We still think a mild recession over the coming quarters is more likely than not.”
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var distributor_server = 3010;
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var broadcaster_channel = '';
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case 'RequestMoreMessages': request_more_messages(msg.data); break;
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data_array.logs = data.logs;
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function check_channel_status_response(data) {
postMessage({ action: 'CheckChannelStatusReponse', stream_status: data.stream_status.status, onair: data.stream_status.onair, connected: data.stream_status.connected });
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function join_publisher_channel(data) {
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socket.send(msg_string); }
postMessage({action: 'PublisherChannelJoined' });
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function connect_to_distributor(msg) {
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socket = new WebSocket("wss://ws.livesquawk.com/ws"+distributor_server);
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function session_info_interval() {
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logging_interval = setTimeout(session_info_interval,logging_interval_time);
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socket.close();
connect_to_assigned_server();
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case 'new_latest_news':
case 'delete_report':
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case 'add_ref_doc':
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case 'calendar_delete':
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case 'added_cme_report':
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socket.onerror = function(event) {};
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console.log('Socket Closed');
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postMessage(data);
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data_array.username = data.username;
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session_info.browser_version = data.browser_version;
session_info.cookies_enabled = data.cookies_enabled;
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session_info.player_version = data.player_version;
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session_info.session_email = data.session_email;
session_info.remote_ip = data.remote_ip;
session_info.php_session_id = data.php_session_id;
session_info.application_name = data.application_name;
session_info.http_referrer = data.http_referrer;
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session_start_time = session_start_date.getTime();
var months = ['Jan','Feb','Mar','Apr','May','Jun','Jul','Aug','Sep','Oct','Nov','Dec'];
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session_info.jitter = data.jitter;
session_info.packet_loss = data.packet_loss;
session_info.effective_latency = data.effective_latency;
session_info.mean_opinion_score = data.mean_opinion_score;
session_info.restarts = data.restarts;
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- Consumer spending improved in July
- Goods and services lift consumption
- Core PCE prices remain stubbornly high
- US households eat into savings to fund purchases – analysts
By Harry Daniels
LiveSquawk News
@HarryDaniels71
31 August 2023|15.00 GMT
US consumers dug further into savings to fund purchases in July as disposable income held steady. Data from the Bureau of Economic Analysis reported increases for both the personal consumption expenditure (PCE) and core PCE measures of inflation.
The headline PCE price index increased 0.2% m/m in line with the last report. Annually, the index rose an in-line 3.3%, up three-tenths from June’s read. In the three months to July, the increase was a 2.1% annualised rate.
One of the Fed’s favoured gauges of inflation, core PCE gained 0.2% on the month, which matched estimates and the previous number. On the year, it crept up a tenth from the prior result to 4.2%, which was also the forecast.
Experts said the rise in the year-on-year core print was due to adverse base effects but noted that this indicator was still more than double the Fed’s target rate of 2.0%.
Ben Ayers, senior economist at Nationwide, said, “Core PCE readings could decline again in coming months given sharper increases over the second half of 2022, but a return to trend remains far off into the future.”
Ayers noted that core services ex-housing – the so-called super-core PCE – rose 4.5% in July versus 3.8% in June. “This undercuts the narrative that underlying is cooling and should be concerning for Fed officials heading into the September FOMC meeting.”
The BEA reported that real personal income increased at a monthly rate of 0.2%. On an adjusted basis, PCE increased 0.8%, a modest beat versus 0.7% predicted, and the upwardly revised 0.6% of June.
“While wages continue to rise sharply, job gains slowed this summer while the average workweek matched a 3-year low in July as employers cut back on worker hours,” Ayers explained. “This is typically a first step towards eventual job cuts but that has not played out more broadly to this point.”
A deeper dive into the drivers of the July outturn highlights that the 0.6% increase in real PCE in July reflected an increase of 0.9% in spending on goods and an increase of 0.4% in spending on services.
Oxford Economics postulated that with the personal savings rate declining to 3.5%, from 4.3% on the month, savings will be exhausted in the coming quarters, coinciding with a downturn in the employment situation. Lead US economist Michael Pearce said, “The upshot is that we expect the consumer will begin to falter in the months ahead, as those savings run out and the labour market cools further. We still think a mild recession over the coming quarters is more likely than not.”