Following May’s weaker than expected data on Americans’ income and spending, analysts expected more weakness in income and a small bounce in spending in June, however both saw improvement with Personal Incomes rising 0.1% MoM (-0.3% exp) and Personal Spending up 1.0% MoM (+0.7% exp).
May’s income was revised down from -2.0% to -2.2% MoM and spending revised lower from -0.4% to -0.6% MoM.
Incomes are up 2.3% YoY while spending remains up 13.6% YoY, thanks largely to base case effect still…
All of which means the savings rate tumbled (to 9.4%, the lowest since Feb 20202, pre-COVID)
Remember when the world’s prognosticators crowed of the pent-up demand coming any minute from the $2.5 trillion in excess savings… well that number is now down to just $1.7 trillion (almost back to $1.3 trillion ‘norms).
Finally, and perhaps most importantly, The Fed’s favorite inflation indicator – PCE Core Deflator – rose to +3.5% YoY (vs 3.4% in May), the highest since July 1991…
This was slightly lower than expected (if that is any silver lining) but still doesn’t look very transitory.