U.S. Data Release: Personal Income and Spending, June 2015

Personal income increased by 0.4% (m/m) in June, or slightly ahead of market expectations for a 0.3% gain. However, revisions to previous data reduced growth in personal income in each of the previous six months. After accounting for taxes, disposable personal income increased by a slightly stronger 0.5% over the month.

"Personal spending advanced 0.2% (m/m/) in June, on par with expectations. Revisions were mixed, reducing May's blockbuster 0.9% rate to 0.7%, while April's near flat growth is now reported as a 0.3% gain", says TD Economics

The personal consumption expenditure (PCE) price index rose by 0.2% (m/m) last month, taking the year-over-year measure higher to 0.3% y/y from 0.2% y/y in May. Core PCE (excluding food and energy) advanced by 0.1% m/m in October - on par with expectations with the year-over-year measure at 1.3% y/y for the sixth consecutive month after revisions.

TD Economics notes:

This was a relatively mixed report. While a robust personal consumption expenditure (PCE) figure of 2.9% annualized for the second quarter was already telegraphed in last Thursday's GDP report, the monthly pattern is somewhat less constructive for third quarter growth than previously thought, with the 0.2% nominal and flat real gain in PCE in June being the weakest since February. 

On the bright side, income gains were stronger than expected indicating that despite the lack of the much sought after wage acceleration, the gains in jobs and hours have continued to support incomes something that should help spending going forward.

The monthly price indexes advanced alongside expectations, but remain higher than previously reported on a year-over-year basis in the case of the core measure. A further improvement in the core measure would suggest that the headline PCE price index, already slated to accelerate robustly as the year-over-year effects of lower oil prices begin to fade, will be even more rapid. This would provide additional comfort to the Fed when deciding when to raise interest rates.