PERSONAL INCOME UP 0.4%, CONSUMPTION UP 0.1%, CORE INFLATION UP 0.1%
For the second month in a row, personal income rose 0.4% in June slightly less than the 0.5% increase that analysts expected. After increasing 0.6% in April and May, personal consumption expenditures rose 0.1% in June, in line with expectations. Both core and headline inflation were modest, increasing 0.1% from May. On a year-over-year basis core inflation was up 1.9%, the first time it has been below 2% since early 2004. Since its high point of 2.5% in February, the year-over-year core inflation rate has moved lower for four consecutive months; moderating as the FOMC has been expecting. After adjusting for inflation, personal consumption expenditures showed no increase between May and June, the smallest gain since March. Real durable goods expenditures declined 1.6%, nondurable goods expenditures were unchanged and expenditures on services rose 0.2%. After declining for two months, real disposable income rose 0.3% as income growth outpaced inflation. This release marks the annual revision to the income and outlays numbers and impacted estimates going back through 2004. Disposable personal income was revised down in 2004 but revised up in 2005 and 2006. Personal outlays were revised down for all 3 years. The negative savings rates in 2005 and 2006 have been revised to positive numbers. The savings rate was 0.6% of disposable personal income in June.
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Kathryn Kobe, NTKN, Washington DC