While included in the Q2 GDP report out last Friday, we at least get to see how the quarter ended with today’s data on spending (ended soft) and income. Nominal spending was flat m/o/m vs expectations of a gain of .1% and the prior month was revised down by .1%. Because the headline PCE price deflator rose .1%, REAL spending fell .1%. Income did rise .5%, .1% more than estimated and it sent the Savings Rate up to 4.4% from 4.0%, the highest since Aug ’11. Bottom line, Q2 GDP saw the slowest rate of Personal Consumption in a year and today’s data on spending show that it was even a touch less than originally forecasted. The positive longer term though was the .5% increase in income, 3.5% y/o/y and the coincident increase in the savings rate. Short term consumption is impacted negatively but savings is the true fuel for investment, not artificially engineered cheap borrowing costs.
