Summary Despite another pullback in goods outlays, overall consumer spending grew 0.3% in July thanks to larger gains on the services side. But inflation grew even faster, as evidenced by the 0.4% monthly increase in the PCE deflator. The good news is that with income up 1.1% on the month, consumers could bankroll more spending; the bad news is that they are disinclined to do so. Inflation Is Growing Faster than Spending Personal income came in considerably stronger than expected in July, rising 1.1% in the month even as last month’s modest income gain of 0.1% was doubled to 0.2%. Spending was soft. With a gain of just 0.3% in July, personal consumption is not even keeping pace with inflation. After accounting for a 0.4% pop in the PCE deflator—the Fed’s preferred inflation gauge—the real spending change was a decline of 0.1%. READ FULL ARTICLE>>
