Calculated Risk has not done his usual analysis of the monthly personal income report from this morning, so I will take it on myself to comment.
Essentially it repeats the earlier retail sales report that consumers are spending their rebates.
Real personal consumption rose 0.4%. this compares to these recent monthly growth rates:
If you assume that real PCE in June is unchanged from May this will generate a quarterly growth rate for real PCE of 1.9%. If you assume that consumers continue to spend their
rebates in June and we see a similar monthly gain in spending the quarterly growth rate would be 2.0%. This compares to growth rates of 0.9% and 1.4% in the last two quarters, respectively.
Given that real PCE accounts for over two-thirds of consumption in the real GDP accounts this
implies that third quarter growth is likely to be greater than the 1% rate of last quarter.
Interestingly, the deflator for PCE in May was 0.4% and excluding food and energy it was 0.1%.
So far this supports the Fed’s argument that core inflation and inflation expectations remain well anchored as the year over year change in the core PCE deflator remained at 2.1%.