Personal income is the dollar value of income received from all sources by individuals. Personal outlays include consumer purchases of durable and nondurable goods, and services. Why Investors Care
| Released on 8/4/08 For Jun 2008 | |||||||||||||||||||||||||
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Highlights
Personal income growth in June decelerated after a sharp boost in May-primarily due to a drop off in income tax rebates. Inflation, however, worsened - even at the core level. Personal income in June edged up 0.1 percent, following a 1.8 percent surge in May. The modest gain in June was better than the market forecast for a 0.2 percent decrease. Within personal income, the wages and salaries component eased to a 0.2 percent gain, following a 0.3 percent boost in May.
On the spending side, personal consumption in June remained on the high side with a 0.6 increase after surging 0.8 percent in May. The consensus had forecast an increase of 0.5 percent for personal spending. Spending was led by a 1.3 percent boost in nondurables which includes gasoline. Essentially June's gain was due to a spike in gasoline prices as overall real spending slipped 0.2 percent, following a 0.3 percent rise in May.
Turning to inflation, the headline PCE price index worsened even more to a 0.8 percent gain after jumping 0.5 percent in May. The core PCE price index also firmed in June, increasing 0.3 after a 0.2 percent rise in May. The consensus had called for a 0.2 percent rise in core PCE inflation.
Year on year, personal income growth eased back to up 5.7 percent from up 6.0 percent in May. Headline PCE inflation jumped to up 4.1 percent from up 3.5 percent in May. Core PCE inflation nudged up to 2.3 percent from up 2.2 percent in May.
Overall, the income and spending numbers continued to be affected by the income tax rebates and higher gasoline prices. We will likely see some unwinding of these effects in the next few months as rebate income drops off and gasoline prices have slipped. But wages and salaries income has slowed due to a weak labor market and that is likely to persist. We can expect consumers to become increasingly cautious about spending and that points to sluggish economic growth ahead. Although it is very early to be putting together third quarter numbers, the 0.2 percent dip in real personal consumption bodes ill for a good third quarter GDP.
Interest rates firmed on today's release with stronger-than-expected income and inflation numbers. Equity futures were little changed from pointing down slightly ahead of the release.
Personal income got a huge spike from income tax rebate checks in May with a 1.9 percent surge. We are likely to get a dip in June, coming off the rebate income. The steadier series to watch is the wages and salaries component which rebounded 0.3 percent in May. This component is likely to be moderate in June, given that aggregate weekly earnings rose 0.3 percent in June, according to the June employment report. On the spending side, personal consumption soared 0.8 percent in May but spending was led by a 1.2 percent boost in nondurables which includes gasoline. Durables slipped 0.2 percent while services posted a 0.7 percent gain. Looking ahead, personal consumption is likely to still get a boost from gasoline price effects and left-over rebate money. On the inflation front, the headline PCE price index worsened to 0.4 percent in May from 0.2 percent the month before. However, the core PCE price index was unchanged at 0.1 percent in May. The latest headline and core CPI numbers for June, up 1.1 percent and 0.3 percent, respectively, point to a pickup in PCE inflation - especially at the headline level.
Personal income Consensus Forecast for June 08: -0.2 percent
Range: -0.5 to +1.0 percent
Personal consumption expenditures Consensus Forecast for June 08: +0.5 percent
Range: 0.0 to +0.6 percent
Core PCE price index, month ago, Consensus Forecast for June 08: +0.2 percent
Range: +0.1 to +0.3 percent
Core PCE price index, year-on-year, Consensus Forecast for June 08: +2.3 percent
Range: +2.2 to +2.3 percent
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Changes in taxes or social security cost of living adjustments can cause some sharp variations in monthly disposable income growth. However, on the whole, monthly changes in disposable income fluctuate less than monthly changes in personal consumption expenditures. |
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Monthly changes in personal consumption expenditures are usually skewed by large changes in spending on durable goods. Spending on nondurable goods and services tend to be less volatile from one month to the next. |
| Personal Income and Outlays: 2008 Release Schedule | ||||||||||||||||||||||||||
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