Increase in Personal Income and Spending
In June 2024, personal income in the United States increased by $50.4 billion, reflecting a 0.2% rise at a monthly rate, as reported by the U.S. Bureau of Economic Analysis. This increase was primarily driven by gains in compensation and personal current transfer receipts. Disposable Personal Income (DPI), which is personal income after taxes, also saw a 0.2% increase, amounting to $37.7 billion. Personal consumption expenditures (PCE), the measure of spending by individuals, rose by $57.6 billion or 0.3%.
The PCE price index, which measures changes in the price of goods and services consumed by individuals, increased by 0.1% in June. When excluding food and energy prices, the PCE price index rose by 0.2%. Real DPI, which adjusts for inflation, increased by 0.1%, while real PCE, also adjusted for inflation, grew by 0.2%. This increase in real PCE was supported equally by a 0.2% rise in both goods and services.
Personal Consumption Expenditures and Price Changes
The June increase in current-dollar PCE was driven by a $53.1 billion rise in services spending and a $4.5 billion increase in goods spending. Key contributors to the services increase were international travel and housing, while within goods, spending on pharmaceutical and medical products and recreational goods and vehicles saw notable increases. These gains were offset by decreases in spending on motor vehicles and parts, as well as gasoline and other energy goods.
Personal outlays, which encompass PCE, personal interest payments, and personal current transfer payments, increased by $59.3 billion in June. The personal saving rate, which is personal saving as a percentage of DPI, stood at 3.4%, with personal saving amounting to $703.0 billion.
Price changes in June showed a 0.1% increase in the PCE price index, with goods prices decreasing by 0.2% and services prices increasing by 0.2%. Food prices increased by 0.1%, while energy prices decreased by 2.1%. Excluding food and energy, the PCE price index rose by 0.2%.
The year-over-year PCE price index for June showed a 2.5% increase, with goods prices decreasing by 0.2% and services prices increasing by 3.9%. Food prices rose by 1.4%, and energy prices saw a 2.0% increase. Excluding food and energy, the PCE price index increased by 2.6% from the previous year.
Revisions and Market Reactions
Updates to April and May estimates showed revisions in personal income, DPI, and PCE figures. April's personal income increase was revised down from $63.0 billion to $52.7 billion, while May's increase was revised down from $114.1 billion to $98.7 billion. Similar downward revisions were made for DPI in both current and chained (2017) dollars, as well as PCE.
The Federal Reserve, which uses the PCE price index as a key inflation measure, observed that inflation eased slightly in June. This moderation opens the possibility for a September interest rate cut, aligning with market expectations. June's personal income growth of 0.2% fell short of estimates, while spending growth of 0.3% met forecasts. The savings rate dropped to its lowest since November 2022 at 3.4%, reflecting robust spending despite softening income trends.
Market reactions included a positive open on Wall Street, lower Treasury yields, and increased futures market pricing for potential Fed rate cuts. Analysts noted that while the economic data supports a rate cut, the Federal Reserve's cautious approach and reliance on data-driven decisions mean that nothing is guaranteed until the September meeting.
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