US consumers take a summer break from spending in June

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 rate", says Economics TD.