Personal Spending Sees Modest Growth In July, Incomes Unchanged

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While the Commerce Department released a report on Friday showing that personal income was nearly unchanged in July, the report also showed a modest increase in personal spending that came in line with economist estimates.

The report showed that personal income edged up by less than 0.1 percent in July following a revised decrease of 1.1 percent in June. Economists had expected income to increase by 0.1 percent compared to the 1.3 percent drop originally reported for the previous month.

The Commerce Department noted that recent changes in personal income have reflected the impact of the government's economic stimulus package, which it said boosted personal current transfer receipts in May much more than in June.

Excluding those receipts, personal income edged up 0.1 percent in July following a 0.2 percent increase in June and a 0.1 percent increase in May.

At the same time, the Commerce Department said that personal spending rose 0.2 percent in July compared to an upwardly revised 0.6 percent increase in the previous month. The modest increase came in line with economist estimates.

Commenting on the data, Peter Boockvar, equity strategist for Miller Tabak said, "Bottom line, third quarter GDP will see positive growth, but the contribution from the consumer side will be muted as income growth remains lacking."

With income unchanged and spending rising, personal saving as a percentage of disposable personal income fell to 4.2 percent in July compared with 4.5 percent in June.

"Over the past 30 years, the Savings Rate has averaged 5.6 percent, and before 1995 it averaged 7.7 percent," Boockvar noted.

The Commerce Department also said that its closely watched reading on core consumer prices showed a continued slowdown in the pace of price growth.

Core prices, which exclude food and energy prices, rose at an annual rate of 1.4 percent in July compared to the 1.5 percent growth seen in June.

While the Commerce Department released a report on Friday showing that personal income was nearly unchanged in July, the report also showed a modest increase in personal spending that came in line with economist estimates. The Commerce Department said that personal spending rose 0.2 percent in July compared to an upwardly revised 0.6 percent increase in the previous month. The modest increase came in line with economist estimates. (Market News Provided by RTTNews)