Economy
Decline in Consumer Spending Raises Concern for Deflation
Published:
Last Updated:
Consensus estimates had called for month-over-month growth of 0.3% in personal income and 0.2% in spending.
Monthly growth in wages and salaries rose $12.9 billion in July, compared with growth of $25.6 billion in June. The largest decrease came in goods-producing industries, where July’s growth of $700 million was far below June’s growth of $8.8 billion.
Personal outlays dropped from $51.2 billion in June to $12.0 billion in July as consumers spent nearly $37 billion less on personal consumption expenditures.
Personal saving rose month-over-month in July, from $709.4 billion in June to $739.1 billion, a savings rate of 5.7% compared with 5.4% in the prior month.
The price index for PCE rose 0.1% in July, equal to the consensus estimate, up 1.6% compared with July 2013. The core PCE price index, which excludes food and energy, also increased 0.1% month-over-month and is up 1.5% year-over-year. Both increases are in-line with consensus estimates.
Following robust GDP growth in the second quarter, the third quarter is off to a rough start. Unless these numbers are revised sharply in the weeks ahead, there is little chance that U.S. third-quarter GDP will match the second-quarter showing. The low PCE index increases could be signaling a coming bout of deflation.
ALSO READ: Leading Economic Indicators Show Continued Growth
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.