While included in Friday’s report on Q2 GDP, the June data on income and spending points to the weak contribution consumption gave to the quarter, even more so than expected. Nominal spending fell .2% vs an expected gain of .1% but because the headline PCE deflator also fell by .2% (due to drop in energy prices), REAL spending was flat. Income rose .1%, .1% less than expected but rose in .3% in REAL terms. The savings rate rose to 5.4% from 5% and compares with the 20 yr average of 4.2% and 30 yr average of 5.5%. Bottom line, with consumer spending making up a big chunk of GDP, it’s no wonder that growth has stalled out as all the factors we all know continue to inflict the American consumer.
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