You might have noticed that many retailers have announced quite positive earnings and sales figures, even many of the brick-and-mortar retailers that had suffered the wrath of Amazon and other e-tailers in recent years. It turns out that personal spending more or less matched personal income gains in July. What stands out here is that the changes to prior years look much stronger on the surface, particularly when you look at the aggregate in disposable personal income.

The Bureau of Economic Analysis (BEA) reported that personal income increased 0.3% in July, after increasing by 0.4% in June. On the personal income side, wages and salaries increased by 0.4% in July, after rising 0.4% in June.

Disposable personal income (DPI) increased $52.5 billion, or 0.3%, and personal consumption expenditures (PCE) increased by $49.3 billion, or 0.4%. The BEA report also showed that real DPI increased 0.2% in July and real PCE increased 0.2%. The PCE price index increased by 0.1%, and the core ex-food and energy PCE rose by 0.2% as well. The PCE price index increased 0.2%.

According to the explanation by the BEA, the July increase in personal income primarily reflected increases in wages and salaries, as well as personal dividend income and rental income. Also noted was that the $29.6 billion gain in real PCE in July reflected an increase of $10.9 billion in spending for goods and a gain of $18.9 billion in services-related spending.

One issue that may stand out in this release is that the leading contributor to the gains in spending on goods was tied to prescription drugs. The largest services-related contributor was tied to food services and accommodations.

The personal saving rate, which is measured as personal saving as a percentage of DPI, was 6.7% in July. That personal savings rate of 6.7% was the lowest level of 2018.

While these monthly gains always sound small, the year-on-year gains in PCE were up 2.3% on the headline and the core PCE was up 2.0%, after backing out food and energy. The headline PCE number was the highest of 2018 and going back several years, but the core rate matched the highs of May and March this year.

DPI was also shown in a longer timeframe in the supplemental tables as $15.5665 billion. This has only had one negative month going back to the start of 2014, when the level was all the way down at $12.8157 billion in January of 2014. All those little monthly gains start to add up over time.

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