After pesonal spending growth slowed modestly one month ago, rising 3.8% Y/Y, in August US consumption once again disappointed, staying flat in the month, below the 0.1% expected sequential rebound, although this was offset by an upward revision to the last month’s data from 0.3% to 0.4%. On an inflation adjusted basis, as feeds into the GDP beancount, Real PCE dipped -0.1% in August, well below July’s 0.3% bounce, missing the expectation of a 0.1% rise while the Core PCE Index was inline with the 1.7% expected on a Y/Y basis.
At the same time, Personal Income was in line with expectations, rising 0.2% sequentially, half the July growth rate of 0.4%, or a nominal increase of $39 billion, down from $66 billion last month, of which wages comprised just $13.3 billion while personal current transfers, aka government benefits mostly in the form of Medicaid, contributed over $10 billion in income.
As the chart below shows, the trendline in income and spending remains fixed in its long-running channel:
And since incomes rose more than spending, the personal saving rose to $808 billion from $782 billion a month ago, resulting in another monthly pickup in the savings rate, which rose from a revised 5.6% to 5.7% in July, the highest since May, suggesting the the dramatic spending spree observed in Q1 and part of Q2 has so far to make any notable comeback.
Expect some modest downward revisions to Q2 GDP estimates as a result of today’s data.
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